Earnings Transcript for INF.L - Q2 Fiscal Year 2020

Operator: Good day and welcome to the Informa Half Year Results Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Stephen Carter. Please go ahead, sir.

Stephen Carter: Thank you very much. And good morning, everybody. Thank you very much for making the time to join us today. I'm joined by Gareth Wright, our Group Finance Director; and Richard Menzies-Gow, our Director of Investor Relations and Corporate Communications. I'm conscious that it's Monday morning, and that we know there's going to be a significant UK government announcement, I think, at 11 o'clock. So, we'll try and make it worth your time. We are ostensibly here today to talk about our half year results through the end of June of this year. But for those of you who've seen our release statement this morning, you will see that one of the reasons why we took advantage of the extension to reporting obligations and moved our half-year results presentation until late September was really to enable us to have a conversation about forward visibility, both to the end of 2020 and indeed through to 2021. The last eight months have been a remarkable experience, I suspect, for virtually everybody on this call, but it certainly has for our business. We, as many people will know, operate at some scale in Mainland China. And so, we have been living the realities of the impact of COVID-19 pretty much since January 23 when China went into lockdown. And we have seen that progressively roll out around the world and certainly for the vast majority of the first half to the official period of this results announcement. Our events business -- physical events business, by the end of February was effectively closed everywhere in the world. I would like to use this just to put on record my appreciation to our colleagues around the world. If they say adversity brings out the best in people, certainly we have seen that within our own company. And our culture of agility, ownership, distributed authority, and personal sense of responsibility has served us extremely well, and also has our relationship with our customers and our co-partners, whether they be venue operators or governments or trade associations. And that has enabled us to run a program of rescheduling and postponement and cost management, which has served the company extremely well. I'm going to work my way through a slide deck which is available. And I will – as I go through it, pass over to Gareth at an appropriate point to take you through the detail of the half-year results and our forward look on our financial position overall. And then, we will take questions at the end. The normal disclaimer, and then on to where are we? Well, as we've been saying for many years, the strength of the Informa group is that we operate in what we describe as the knowledge and information economy. And if there was ever a circumstance where the knowledge and information economy comes to the fore, it is when 65% to 70% of the world's population is in lockdown and working remotely, where connectivity to subscription data, online activity, data and information, high quality information, trading on online platforms, and access to digital content has never been more important. We, like many others who operate in the advanced learning academic publishing environment, made available all of our articles and knowledge. As it relates to COVID-19, we've seen over 2 million downloads of that information that was made freely available by our colleagues in Taylor & Francis. Broadly speaking, for those parts of our business that are in the subscription and data world, this circumstance has served us well and we have sought to serve our customers well. But clearly, where we have felt the financial and operating pain has been in our physical events business, and we'll come on to where that leaves us and takes us in a second. The key proposition that we are seeking to lay out in some detail today is that we have used the summer period where it became clear that the North American and European markets were not returning to physical event trading in 2020 to take our plan to a point whereby we could achieve long-term stability and security for our company even if there were no physical events in 2021 in North America or Europe. Not our plan, not our preference, not indeed our view, but we have taken the position that getting to that level of stability and security is essential eight or nine months into this situation. What speaks to that is a combination of things. Clearly, our subscription business is at the fundamental underpinning. Our depth in specialist markets is allowing us to secure our relationships on renewals and annual contract value. The nature of our events business, even where it does not specifically trade is that it forward books and we have been working extensively on our forward relationships with our customers to maintain our forward booking. And also we have used this circumstance to learn and experiment at scale in the provision of virtual events. And indeed, sitting here towards the end of September, we have run probably over 500 virtual events all over the world in multiple geographies in multiple categories. Many of those events, networking events, some of those events, product discovery events, some of them trading events, some of them training events are very different products. And 2020 has been a petri dish of experimentation for us and indeed for our customers, and that has taught us much about how we develop that capability on a going-forward basis. Stepping back to go forward, if you look at our financial performance in the first half of 2020, our subscription business has been very robust, and we had a strong start to the year actually in our event-led business where it was trading in January and February before COVID-19. It was further confirmation of what we have seen in the preceding six or seven years, which is we have a very strong portfolio of brands and market positions in specialist markets. And when the world is able to travel, transact and trade face to face, our products serve us well. But we then had to get into the launch of our Postponement Programme, which we did deep and fast, to shift where it made sense to later in the year, and that has worked in Mainland China, where we began to see product return at the end of June and is now running at pretty near standard operational capacity in 2020. It has not returned in North America and Europe, and we'll come on to how we are reacting to that on a going-forward basis. Our revenues for the first half are tracking significantly below where we were this time last year. That is almost entirely – in fact, entirely a function of the gap in revenues in our events business. Our subscription businesses are effectively flat year-on-year. We saw some weakness in the physical part of our books business in Taylor & Francis, partly because of supply chain impacts, distribution, and access, and partly because of the closure of college campus bookshops and indeed college campuses themselves. That flows through to profits. And as a consequence, we have moved quite significantly on our costs in the first half with a nearly £300 million worth of direct and indirect cost savings. One of the perverse strengths of our business is that we have a very highly flexible cost base where costs are incurred very directly related to activity. And so, our ability to be able to flex our costs with our activity schedule has been something that has given us a flexibility of response. I'm pleased to say we remain in positive free cash flow for the first half. Gareth will talk more about that. But again, cash flow strength and volume and quality of cash flow is a feature of our business in normal times. But even in in stress times, we have worked very hard on cost management, on cash controls and on cash conversion. And our balance sheet largely is a function of the support from shareholders, but also the management of our other costs has allowed us to keep our leverage at a comfortable level in the first six months of the year. We will see a leverage spike at the year-end for reasons that we will talk to, but we have a view about how we work our way through that which we will return to. I suspect that most of the questions, the commentary and the forward crystal analysis understandably will be around the weakness or not as a result of the lack of return to physical products in North America and Europe. But I don't want to gloss over the depth and the resilience of our information and intelligence businesses. Again, one of the other strengths of the Informa group is that we are not a single business. We have over the years resisted the temptation and indeed at times the encouragement to divest and be a single purpose business. But we have always taken the view that operating in three markets in advance learning, in high quality business information and in B2B events was the basis of our group and this circumstance has borne that out. Taylor & Francis is now a multifaceted business increasingly where we see a spread of product, subscription product, open access product, open research product, digital service products, electronic product in the main and still some residual physical product where we have felt some pain in the first half of 2020. Our intelligence business, where we have spent much time over the last three or four years improving both the portfolio, it's focusing on key markets. Importantly, its product and also the way in which that product is accessible by customers. And we have seen that pay dividends in the first half of this year, and we have a very strong forward new business pipeline through to the year-end. So, we feel confident in both those businesses on their likely year-end performance. Interestingly, within our events business, unsurprisingly, this circumstance has driven us to virtual and digital solutions. And many people on this call have had their own personal experience of participation or attendance in virtual and digital events. It's a bit of a [indiscernible], depending upon which you attend. There are a raft of technology platforms and services that are developing to provide service delivery and capability. And we have been learning through a process of constant innovation as to what works, what serves, what delivers, and which partners are best for us to work with. In the short term, our focus has largely been on keeping our brands visible, refreshing our data, and ensuring that we're providing some service to our customers when they are otherwise unable to gain access to their customers. On top of that, because of the volume and scale of our business, it's allowed us to drive audience, and that is serving us in our media and marketing services revenues. And in those event-led businesses where we do have a data product to offer, aviation and technology probably being the two leading examples, that has served us well in the data sets that sit underneath those events businesses. And that mixture of service delivery and revenue reach and emerging revenues is contributing something to 2020, and we believe we'll have the capability of delivering something more in 2021. And that speaks to our belief that we're now finding a floor in revenue for the group, even without physical trading in physical events in North America and EMEA in 2021. For those colleagues who are on the call who are in the United Kingdom, you will get a much more detailed update on the macroeconomic impact of COVID-19 later today from the UK authorities, so I will not attempt to compete. But suffice to say, there are multiple statistics that bring out the practical reality of how this COVID circumstance is impacting individuals. And we see that in the case count. Countries where we see a differing level of case progression, we're probably the notable outlier in terms of – at scale, in terms of case reduction is China, how that's changing behaviors. And in business life, the place where that is most striking is in European flight volumes and US flight volumes where even post Labor Day we have seen no material return to business flight activity in North America. And the net consequence of that is, for our products, which is North America and Europe, demand physical travel and face to face interaction, it has left us with a gap versus our previous plans. Everyone on this call will be drawing their own data on what's happening in clinical trials. We have a window into that through our Sightline business, what's happening on the status of those clinical trials, we track that and indeed provide that as a subscription service to our customers. Where are we seeing progress, which I think the world is seeing progress on therapeutics, and there are some estimated timelines on when the vaccine cavalry may or may not come over the hill and where it arrives first and how it gets industrialized at deployment and scale. There are different views and different data points on hospital admissions. But notwithstanding all of that, our view is that, on a forward basis, we have been wise to make the judgment that we're announcing today, which is we're extending our Postponement Programme through to the mid to late spring 2021. That has the effect of moving out our events business in North America and Europe at a physical level until the other side of winter. The other side has six more months of progress on vaccines and therapeutics, the other side of the US presidential election, and a place which allows us to plan for nearly $400 million worth of revenue shifting from the front end of the year to later in the year. Staying in 2020, colleagues on the call may recall when we raised some additional equity in April and then we did our update in early June. We had a vigilant case, a kind of worst case scenario, which assumed that there would be zero physical events anywhere in the world until Q4 and then there would be a gradual return everywhere from October on the grounds that we would have made progress on containment or cure. And then that would see us depending upon the pace and rate of that return of permissions and confidence, getting to a group revenue of between £1.5 billion to £2 billion, and that would demand some cost savings, but would be give us a forward trajectory into 2021, which was more optimistic. What we have seen is that that has not happened in North America. It has happened actually earlier than we thought in Mainland China. And indeed, Mainland China has come back more strongly than we'd anticipated in that vigilant case, but it does not offset the gap from what is our largest market in North America. And so, net for us in 2020 revenues, that takes our revenue guidance down to nearer £1.7 billion and we have pretty good forward visibility on the reality of that now. There are virtually no physical events other than outdoor events anywhere else in the world. It's encouraged us and demanded that we up our cost savings in the year and, indeed, further up our cost trajectory – cost savings trajectory into 2021 because we have extended The Postponement Programme, as I said earlier, through to mid to late spring of next year. Slide 12 just shows that graphically. China, if one strips out the impact of lack of international participation, and fortunately for us, the majority, if not nearly all, of our products in Mainland China is largely domestic, what we're seeing is a performance in Mainland China which is close to where we had anticipated we would have been even at the beginning of the year. But North America is a stark contrast of the opposite. In China, and again, particular kudos to our teams there, not least because they've also therefore been pioneers of our AllSecure, industry-led safety standards where we have operated in conjunction with health authorities, governments and venue partners, a standard which enables controlled gatherings to happen with comfort and confidence and it tend to use to the biosafety and hygiene procedures, a compulsory requirement for digital preregistrations, digital prescheduling of meetings, traffic management, lower densities, sometimes that's demanded and extension of the actual events have more time, but lower densities during that time. And it really has seen our business return. And the truth of these businesses is they require two things to see them come back. They require permission from the relevant authorities which we have as a result of our AllSecure standards and it requires the confidence of the communities and the exhibitors and the attendees. And we've seen that confidence build in China. We've run nearly 20-odd events since July, two or three of which have been up at the – over the period of the event north of 100,000 participants. So, these are physical, controlled gatherings back at scale, with discipline in a market of scale and indeed discipline. So, where does that take us on the next stage of our COVID-19 action plan? Well, as I said, The Postponement Programme, we have made our own unilateral decision to extend it to mid late spring 2021. That moves a large number of physical events, nearly £300 million to £400 million of revenue, to later in the year, allowing us to still serve up our product to our customers. And it removes one slightly high class problem, but nevertheless it removes it, which was because of the concertina effect of driving a lot of volume originally into the last quarter of 2020, there was some concern that if we then replicated that in near term in 2021 with the same brand for the same industries with the same product, would we effectively over-cap pent-up demand. In reality, we will not be doing that. We are now building a full schedule of virtual products. And I'll talk more about that later. And we now have a significant experience in deploying our AllSecure standard and that is working very well. Savings, cost and cash, Gareth will come on to in a second. Similarly on financing. And on the ongoing colleague support, we've taken the view from the very beginning that prioritizing the wellbeing of our colleagues and customers was critical. We have followed local advice in every market in which we operate. That's nearly 40 markets at reasonable scale. We moved instantaneously to full remote working for the entire company in all markets. Our enterprise support for our colleagues has worked flawlessly. We've put in place significant employment flexibility to allow colleagues to volunteer and support their own local communities. We set up our own funded support fund. We have not drawn on the furlough schemes in the United Kingdom. And we on a go-forward basis are going through a program of balanced working to work out how best to get the balance right between what office space working creates in terms of relationship and training and collaboration and innovation and what remote working can deliver in terms of security, safety, focus, and effective productivity. I'm going to pause there and pass on to Gareth to give us an update of where we are financially. Gareth?

Gareth Wright : Thank you, Stephen. Good morning, everyone. Thank you for dialing in. I'm going to start by talking you through the results for the first half of 2020. And then, I'm going to look forward, focusing on the steps we've taken to ensure the group's financial stability and security through 2021. So, starting with the income statement on slide 16, you can see the [indiscernible] £814 million of revenue in the first six months of 2020 and converted this into £119 million of adjusted OP. As you'll see when we get to the divisional analysis on the next slide, this is really the outcome of three factors – Brazilian trading in our subscription-led businesses and a bit by forward books subscriptions. Solid performance from our non-physical revenue in the events-led businesses and disruption in the physical events portfolio within our event-led businesses caused by COVID-19. The broadly £600 million reduction in revenue in H1 has resulted in a roughly £300 million reduction in OP, with the balance being a circa £300 million of direct and indirect cost savings achieved, which I'm going to expand on in a few slides down. Net interest for the six months decreases year-on-year by around £10 million. This is primarily a combination of lower borrowing costs following refinancing in H2 2019, assisted by the lower levels of average net debt in H1 2020. Adjusting items for H1 2020 totaled £872 million, but there are two key items which make up 85% of that charge. Firstly, we've taken a £593 million non-cash impairment charge on the carrying value of physical events portfolio to reflect the impact of COVID-19 within our long-term prudent modeling assumptions. And secondly, we have £148 million charge for intangible asset amortization, which is consistent with the prior-year charge. With adjusting items, there are also costs classified as COVID-19 exceptional costs, which are primarily events rated costs where the event was suspended or canceled and we couldn't recover the cost or we took a long-term view around our stakeholder relationships not to pursue repayment. The effective tax rate reduced to 13%. The main driver of the decrease is the fact that fixed tax deductions such as the amortization and goodwill have a greater benefit when the group's profits reduce. And finally, there's a £5 million pound credit from minority interest in first half. The minority interests are always Markets and Connect and all in events-led businesses that have not traded because of COVID. Moving to a divisional summary on the next slide, starting with the subscription-led businesses, which as I said earlier performed robustly to the first half against what is a challenging backdrop for all businesses right now. Informa Intelligence underlying revenue growth was 1.8%, driven by a mix of robust renewals and good new business wins. In the verticals, pharma was the strongest performer. The margin improvement was primarily because of the – driven by the 2019 disposals. However, there were some favorable mix and phasing benefits in the first half which we'd expect to reverse in the second half. Taylor & Francis revenue saw an underlying decline of 0.7%. There was a good performance in research publishing, with robust journal subscription renewal rates and good growth in open access. But in enhanced learnings, we saw a more mixed performance. Electronic revenues grew strongly, but physical book revenues were impacted by the temporary closure of universities and physical supply chains as a result of COVID-19. Turning to the event-led businesses, the performance almost entirely reflects the impacts of the pandemic control measures and the ability to operate face to face physical events. Informa Markets started the year well before lockdown commenced, but Tech and Connect in normal times have little trading scheduled for Q1. Informa Tech's underlying revenue decline was only 7%, underpinned by Omdia media revenues, but also benefiting from a heavy weight in revenues through H2 in its normal annual phasing. Finally, Tech and Connect made an operating loss in H1, but this was before the full effect of cost saving measures took effect and before revenue from virtual events gained momentum. The combined benefit of these two things is expected to eliminate the operating loss in H2 2020 excluding COVID-19 exceptional costs. Leading us to the next slide which outlines the sources of revenue. Here we're going to cut into the revenue from a product base angle to give you a feel for what's in the £800 million that was delivered. The event-led businesses generated just over £400 million in H1 2020, around a quarter of which was not generated by physical events. There are two main sources of revenue. Firstly, virtual events. While revenue contribution in H1 was modest, we made significant progress in developing and delivering a product our customers value and Stephen is going to expand on this a bit more in a minute. And this revenue is also generated by a wide range of specialist content, digital products marketing services, which goes to market using the contacts and knowledge built from operating events that don't require the physical event [indiscernible] in 2020. Subscription-led businesses delivered £400 million, zero events revenue, broadly £250 million from Taylor & Francis and £150 million from Informa Intelligence. Which means, in total, over 65% of group H1 2020 revenues were delivered from non-physical event activities. Moving to the free cash flow analysis. We delivered over £70 million of free cash flow in H1 2020, which together with the equity raise has reduced half-year leverage to 2.3 times. This included a £44 million working capital inflow, delivered by a combination of strong cash flow controls, tight cost management, lower deferred income releases following the postponement or cancellation of events, together, importantly, an ongoing customer commitment to forward bookings in the event-led businesses. To put some color on that last segment. Our customers requested around £40 million worth of payments to be refunded in the first half, which is a very small portion of the overall deferred income in the balance sheet. Looking forward to the full year, we're modeling for working capital outflow which is prudent and to reflect the fact that we're not banking on a significant increase in physical event sales in H2 following the postponement of events to mid or late spring 2021 under The Postponement Programme. The £25 million CapEx invested in H1 2020 was focused on revenue growth areas not impacted by the pandemic. So, for example, e-book and open access platforms in T&F, product improvements in Informa Intelligence, mainly in pharma and finance, and digital product development in Informa markets. And we spent around £35 million of cash in H1 on COVID exceptional costs, which I explained earlier. In terms of COVID-19 action plan, Stephen spoke to the postponement plan and the ongoing colleague support areas, so I'm going to focus on the other two. Our effective cost and cash management programs are targeting £600 million plus of cost savings to be actioned by the end of the year, with £400 million of direct cost savings and £200 million plus from indirect savings. We're also maintaining our focused cash controls. And the primary objective of these actions together is to eliminate any net cash burn and to ensure they're cash flow positive by January 2021. Focusing on our financing flexibility, we've already actioned measures in H1 2020 to increase our liquidity. We raised just under £1 billion equity. We've added an incremental £750 million credit facility, and we've confirmed our eligibility, but not drawn on the £300 million Bank of England CCFS. Looking ahead, our next steps will be to extend our maturities and potentially add further liquidity through the Euro bond markets and to renegotiate or repay our US private placement borrowings. To wrap up where we are in these actions and where that can get us, we'll eliminate any cash burn and will be cash flow positive, we've extended our debt maturities and maintained our significant liquidity and removed the point covenant in US private placement borrowings. Moving, on slide 21, you are thinking, I think, about cost management message, but where are these costs coming out of. When targeting cost savings, we very much focus on our COVID-19 action plan objective of delivering stability and security, whilst protecting the long-term strength and value of our business. In H1 2020, we've identified and actioned over £500 million of cost savings, £220 million from direct costs avoided and £80 million from indirect costs saved. In H2 2020, we've identified and are actioning a further £300 million of cost savings from £180 million of direct cost avoided and £120 million in indirect costs saved. The phasing of the total indirect cost savings to be actioned by the end of the year means around £140 million of the £200 million will benefit 2020, with the balance benefitting 2021. These cost savings of £600 million represent around 30% of the 2019 cost base compared to a reduction in full-year revenues of around 40%, with the difference in the two arising where we've taken decisions to protect the long-term strength and value in our business. So, looking at our current liquidity and financing profile at 30 June 2020, you can see the strength of our financial position. We have substantial liquidity and cash. We have no drawn debt maturing until 2022. We have a single point issue regarding the leverage covenant in our US private placement borrowings. And we had no covenants on our bonds or our RCF. If you go on to the next slide and paint the pro forma scenario where we've prepaid US private placement borrowings to eliminate that point covenant issue, we will be cash positive by the start of 2021, we will still have substantial liquidity, we will have no drawn debt maturing until 2023 and we will remove the covenant constraint on the business. And this is the plan that in essence we're working to deliver. To summarize on stability and security on slide 24, we continue to see resilient trading in our subscription-led businesses underpinned by forward book subscriptions. The event-led businesses delivered just over £400 million in H1 2020, around one quarter of which was not generated by physical events. Our cost and cash management plan will make us cash flow positive by the start of 2021. We have substantial liquidity and cash. We have no near-term debt – drawn debt maturities. And we can remove the point covenant constraints on the borrowings. All of which together we believe deliver financial stability and security through 2021. Now, I hand you back to Stephen.

Stephen Carter: Thanks, Gareth. So, if you move to slide 26, I'll do [indiscernible], so we can get to questions. Look, in essence, there's little about the circumstance that I think any of us like on a personal or professional or indeed a human basis. But from a business basis, we've always taken the view that we want to try and stay slightly ahead of the situation we find ourselves in. We made those decisions early in January, February, March to take our costs, deploy at scale our Postponement Programme, raise equity, extend our liquidity. And now, we're doing a similar series of actions again, further reducing our costs, taking our Postponement Programme out till spring 2021, further securing our financing and liquidity, with the objective being to give the company a stable and secure platform through to the end of 2021 and beyond even if physical events do not return in North America or EMEA. Not our plan, not our preference, not indeed our view of what is going to happen. But it is a sensible and secure planning assumption. The first stage of that on slide 27 is moving our physical trade shows in North America and EMEA out of the early part of 2021 into a later part. Clearly, that has a cash flow implication, which we've had to manage in order to feel comfortable that we can be in positive cash flow from January. But from a practical perspective, it gets us to the other side of winter. It puts another six or seven months into the work that can be done on vaccines and therapeutic discovery and deployment to get to the other side of the US presidential election and what flows from that and on the other side of it, and allows us to plan now for an assumption of activity, even if that does not come back on that schedule. Slide 28 puts some more color around the point that Gareth made earlier on the direct costs that we've avoided, which have been significant, nearly £400 million, and that is one of the perverse strengths of our business. We can flex our costs in a very effective and speedy way. And what indirect costs have we removed? And one of the things that I want to just draw out here both the sad fact of it, but also the proportional impact of it, is that we, as a company, have tried to resist any form of compulsory redundancy anywhere in the world up until now. We took that view early, that we would do everything that we could to preserve the intellectual property of our business, our people, our culture. And we have offered a sabbatical program to colleagues which has been very popular. We offered a voluntary severance program on terms that were fair and supportive, which also saw some significant take-up. But today, we are announcing internally and indeed externally that not in Taylor & Francis, not in Informa Intelligence, mainly in North America and EMEA in our events businesses, and in some specific areas in global support, we sadly will have to look at compulsory redundancies. But to put it in context, it will mean that our compulsory redundancy program is about 5% of the total costs that we're removing. So, 95% of our cost management we've been able to do without cutting in to the essence of our business, which is the genius and commitment of our colleagues. That program will run through to the end of December, will be completed latest by the year-end, allowing us to move into 2021 with a run rate of £600 million worth of cost reduction. Slide 29, I'd like to dwell on just for a couple of seconds around virtual events. I'm sure, as I've said before, many colleagues on this call will have had their own experience of a virtual event. I have been to many. I've participated, spoken, hosted and indeed been in team brainstorming as we develop them. And it has been a very real and learning process. Just to be clear, we are not in any way, shape or form saying that a virtual event replaces a physical event. It does not. It does not replace the immediacy, the engagement, the serendipity, the humanity, the sense of fun and discovery, the captured audience, the level of attention. I don't know how many of the – how many have we got? – 280 people that are listening to me are multitasking at the same time as doing other things at physical events. There is a higher sense of everyone being in the same place doing the same thing with the same sense of intensity. And that network effect of a physical event, we believe, will return with scale, with impact, and with customer demand. We believe that not because we have to believe it, we believe it because we've seen it. We are seeing that happening in China and actually in Japan, which started to come back last week. So, when markets open and there are permissions, when confidence returns and there is participation, the physical product stands up again. But when it doesn't, there is still a customer need, and that customer need might be a need to learn or network, it might be a need to drive audience, it might be a need to do product promotion or bring a new B2B product to market, it might be a need just to either do advanced specified product discovery in your own very unique market or indeed it might be a need to do direct product procurement, often for smaller products, not for larger business products. And we have discovered that there is a market for the virtual events. It does give you some advantages. It gives you unlimited reach because there is no travel, there are no geographic boundaries. It provides us with deep pools of data and understanding about what our customers are doing. There are no calendar constraints and many of our virtual events have lasted for 6 weeks, 8 weeks, 12 weeks, 14 weeks, and that allows the new business model, it enhances the visibility of our brands, and by definition, it extends the customer engagement. There is no revenue read across from physical events to virtual events. And it is not yet clear to us what the pound to pound or dollar to dollar exchange from physical to virtual is, but there is a market, there is a demand and we are getting better at delivering those products on a daily basis. Slide 30 makes clear, we've now done over 500 of these products in many markets, in many countries, working with thousands of attendees, sponsors, brands and exhibitors. And I picked out four on slide 31 because they're in different markets, very different markets, cybersecurity, biotech, food and ingredients, and fashion, both wholesale and retail. Some of those have been time-defined events. Some of those have been longer period events. Some of those have been audience engagement events. Some of them have been product discovery events. Some of them have had training streams. Some of them have had product discovery, product directory, and indeed, some of them have had product exchange, service delivery as an integral part of the event. All of them have provided some security to our customers that our brands are still trading. And as I said at the beginning, it has materially refreshed both our data pools and, as Garrett has said, the forward commitment of our customers to onward participation. The next slide really talks to how we have reshaped our physical products to allow governments and authorities to be comfortable that exhibitions are not uncontrolled gatherings, they are controlled gatherings, they have a high degree of discipline, we know who is attending, we know who is an exhibitor, we know who is an attendee, we know who wants to meet who, we know when they want to meet them. And it allows us to – by altering density regulations and specifications, to give people comfort on travel security and bio safety. This has now been road tested in reality in both China and in Japan and in our outdoor events. And we have a high degree of comfort that we have a world-beating standard for our physical product when the permissions do return. So, to summarize. Slide 33 looks forward to 2021. This isn't guidance, but it's a shape of the business. And we have set ourselves the task over the last couple of months when it became clear that North America and EMEA were going to stay largely closed to physical products for the remainder of 2020, that we needed to move to a position whereby we had a certainty of our own future, however bad that future might be. Whether the group is underpinned by our high performing subscription businesses, we have developed a scale of products and revenues in media, in marketing services, and an emerging product set in virtual events and digital services which gives us a revenue source from our assets and brands in the events business, even if they're non-physical. We have a high degree of confidence in the physical products in China. And I suspect in the rest of that region, there will be a faster return to physical product than we may see in Europe and North America. Coincidentally, that gives us a baseline for 2021 in revenue of around £1.7 billion, which is where we now see ourselves landing at the end of 2020. And that has enabled us to adjust our costs, so that we have a cost base at the end of this year that matches that revenue and will allow us to go into 2021 secure in our own cash flows, secure in our own access to credit lines, and secure in our own balance sheet. Which leaves an outstanding question, which is so what will the revenue from physical events in North America and EMEA be in 2021? And at this stage, we have no answer to that. We have an operating case, we have a view, we have a planned schedule, a physical events running from mid to late spring through to the end of 2021. But we don't need that for the business to be both stable and secure for 2021 and beyond. On that note, I will open it up to questions, Adam.

Operator: [Operator Instructions]. We can all take our first question from Adam Berlin of UBS.

Adam Berlin: The first question I wanted to ask was about the last slide you showed, which gives the breakdown of the different revenues for the minimum in 2021. Can you just explain the £840 million baseline from subscription? I think in the past, you talked about £1 billion of non-event revenue in 2019. And just break it down for us, if you did £100 million of kind of non-event -- non-physical event revenue from media and digital in H1, what is the equivalent number in that 2021 guidance you're talking about? Because the way it's laid out is a little bit different from what we've seen before. So, that's the first question. The second question is on the balance sheet. When you reported after the capital raise, you talked about net debt releases of around £1.3 billion. It looks like it's gone up about £300 million in the intervening three months despite you delivering positive operating cash flow. Could you explain what the delta is around that and why you think the net debt's gone up? And then the third question is, can you talk through what the drop through is for next year? So, if we've got this baseline of £1.7 billion of revenue into 2021, if we do get an extra £100 million or £200 million revenue from events in other parts of the world, what should we think about the drop through on EBIT and if those events do come online? Thanks very much.

Stephen Carter: Let me take the first and the last. And then Gareth will come in on the net – what's the variances in the net debt post the half year. On the shape of the revenue on 33, I think – and Richard can keep me honest that the difference in the way in which we've laid this out, we're not trying to give guidance or recategorize our revenues. What we're really seeking to do here was just to illustrate how we think about how do we get stability and security absent physical events in North America and EMEA, not that we want it. And so, we have been – we've sort of categorized it. The subscription businesses here are only T&F and Informa Intelligence. So, if I compare to the previous categorizations, we haven't included, for example, any of the subscription data that we do actually have in some of our event brands. So, in tech, we've got subscription data from Omdia. In aviation, we've got subscription data from CAPA. Whereas that £840 million plus is just a combination of T&F and Informa Intelligence. And then, what we've said is the sort of the other half of the business is really our event revenue, our event-related revenue. We have a high degree of confidence that physical events will continue in Mainland China in 2021. And our confidence for that is based on the reality that it's happening today. And so, I think the reasonable assumption is that things do not get worse, and indeed possibly may get better through the entire period of 2021 in that region, but that number is just China and outdoor events, which also are running now. And then in the middle bucket are as Garrett and I both talked to, where we either currently or prospectively can see revenue sources from the services that we offer through our event businesses. So that would include Omdia, CAPA, which are two data businesses within our events portfolio, our media revenues, our marketing services revenues, and our virtual event revenues and our other digital service revenues, so that's how we've shaped that revenue slide. On the drop-through, we're not giving any forward guidance. We're not giving any guidance for 2020, let alone 2021 on profit. But I think the way I would think about it is the only – I don't know if this qualifies as a glass half full, Adam, but it is certainly a quarter full perhaps, is we have significantly adjusted the cost base of this business. By the end of the year, we'll be north of – 30% of our costs will have come out. Now, we've got more than that in revenue loss, but that means that our traveling rate of cost is considerably lower. And we will not be taking those costs up, certainly, the indirect costs before we have our high degree of confidence that the physical revenues are returning. So, you can make your own assumptions about what the drop-through impact is on 2021, but we're not offering guidance on that specific point. Gareth, over to you on the debt.

Gareth Wright: So, you're right. At the time of the equity raise, we quoted a net debt number of 1356. What that number was was our year-end 2019 net debt pro forma for £1 billion equity raise and stripping out the IFRS 16 lease liabilities, which we stripped out because they're not included in net debt for our covenant leverage calculation purposes. And that's how you got to that 1356 number. If they want to bridge from that number to the reported net debt at the half year, you need to add back the IFRS 16 lease liabilities, which you can see in the press release are worth about £330 million, you need to increase debt by that, and you also need to allow for the increase in debt that's occurred in the first half of the year, and debt has increased in the first half of the year by about £260 million. But, again, as you see in the release, around £240 million of that was simply the retranslation of our dollar-denominated borrowings, with the stronger US dollar across the first half of the year, increasing net debt by about £240 million. So, actually, the free cash flow of £70 million, with a few items, M&A, et cetera, [indiscernible] broadly cash neutral funds to really position overall in the first half.

Operator: We can now take our next question from Nick Dempsey of Barclays.

Nick Dempsey: Just got three questions, please. So, if you find yourself in the end having to cancel some shows in 2021, and that's the second year that you've cancelled them, isn't it quite likely that some of your exhibitors will just start to find other ways to build their order books, meet their customers, et cetera, and maybe never come back to that brand? Is that second cancellation kind of critical to avoid that kind of finding a way around the exhibition? And how much confidence can we have that that won't be the case? Second question. When you're referring to a positive monthly cash flow position by January 2021, are you including cash exceptionals in that? How are you thinking about working capital flows? Because there's been an inflow in the first half. Clearly, could change in the second half. Just wondering, sort of, all-in, whether we'll definitely be positive in the way you said. And third question, at Taylor & Francis, you said, advanced learning tradings returned to more typical patterns over recent months. Does that mean that you could see a return to growth or close to it? How should we think about that just in modeling terms?

Stephen Carter: Again, let me take the first and the third. And Gareth will give you comfort, I'm pretty sure, on the cash flow position. On the canceled shows, well, I don't know and neither does anybody. I don't see any logical reason why a second cancellation is a tipping point. And indeed, as a practical matter, in many instances for our larger shows and brands, we're way past the second cancellation, Nick. We're on the third or fourth. Because we've already moved them twice. Because when we started The Postponement Programme in February/March, in a number of instances, we've rescheduled twice. I think it is a legitimate question to ask, but it's a kind of who-knows. The evidence we have got, I suppose I would say, the facts as we would present them are slightly hostile witnesses to that thesis. What are the evidence? Well, all of the evidence from our customer research is the customers very much want the physical products to return. The evidence is when we have brought physical product back in China and Japan, we have seen a high degree of return participation and forward booking. The evidence is that customers have been comfortable in the main 85% to 90% rolling their cash forward bookings forward. And then, the evidence is that there is a high degree of participation in our virtual event products because there is a need and those needs are multiple. Now, if this goes on in perpetuity, then we're in a different place. And that speaks to why we've shifted the business model to a place whereby we now need to cut our costs [indiscernible] to a point whereby we can see a way through this even if there are no physical events. Now, clearly, the upside from that will be slower than the upside and the drop through if physical events return because we'll have to build a deeper product set with digital and virtual, we'll have to build a variety of different products and services. But if it is the case that there is no airline travel, no business meetings, no face to face activity, no human engagement, well, that's a very different world. And what we are saying is, in that world, we can see a baseline revenue which we can manage to. On T&F, I doubt we will get to growth, but I don't want to sell the past because I suspect that they have some T&F colleagues on this call. Our point really was that, in the second half of the year, we're not facing yet scale campus closures and the supply chain has managed to adjust and course correct for the physical interruptions that it was having, and so that's not repeating itself. But the converse of that is that the comp in the second half and certainly in the fourth quarter in 2019 is a tough comp. And so, I think we would – I would regard, and here I am I slightly selling the past, I would regard a flat year-on-year outcome as a triumph. When I think anything that is marginally negative around where we were at the half year at minus 0.7, given the comps, really would be a good – a really good outcome. But the fundamental point is that the underlying business is robust and resilient. The electronic business, the digital business, which is about 85% of the revenues, in T&F is in growth, even notwithstanding COVID. And so, the point where we've got pain is in that very specific physical product set. Gareth, you want to pick up on the working capital flows?

Gareth Wright: In terms of your – we explained in another question, what does cash flow positive mean? What it means is basically that at a net funds flow level, we believe the group will be generating cash in the first half of 2021. So, that's [indiscernible]. In terms of the color around it, we're comfortable about that because, first of all, we've got this revenue baseline that we've got clarity around, and we can see a good line of sight over. We've got the cost savings of £600 million plus that we will deliver by the year-end for benefit in 2021. We think we'll have completed that restructuring in 2020, so that the cash outflow for restructuring would have gone out the door. And in other lines, like M&A, et cetera, we'll manage over the course of 2021 to keep them broadly neutral. In terms of working capital, we're forecasting a reasonable working capital outflow in the second half of this year, both from the fact that we'll operate events and the deferred income will come out and also because, with the Postponement Programme to mid to late spring, we're not anticipating a lot of working capital inflow in the second half of this year. So, we'd say the working capital outflow for the full year will be somewhere around about £100 million in 2021. If you put those factors together, that gets us to a position whereby we've got some confidence and clarity around being cash flow positive in the first half of 2021.

Operator: We can now take our next question from Adrien de Saint Hilaire of Bank of America.

Adrien de Saint Hilaire: So, a couple of questions, please, related to events. So, first of all, I think you mentioned that revenues in China were tracking better than expected, better than budgeted. So, let's call it down 20%, 30% versus 2019. If we assume that events resuming in the second quarter of 2021 in the US and Europe, given your comments that the recovery in US and Europe would be probably slower than in China, should we assume that the 2021 revenues would be worse than 30% off versus the 2019 baseline? That's the first question. And then, the second question, despite the pressure in the industry, we haven't seen any moves in terms of M&A and tie up between players. Is that something in the making? Or would you not expect any consolidation in the events industry? Thank you so much.

Stephen Carter: To be honest, it's a very fair question, and I wish I could give you more guidance. But I just think I would be doing you a disservice if I try to. You're correct in your analysis broadly in China, although let's wait and see how it finishes at the year-end because confidence there is generally building. And so, we'll see what the final position is in China on a kind of 2020 versus 2019. And bear in mind that that effectively is two buckets of revenue, is your domestic revenues and international revenues. And most of our Mainland revenue shows are domestic The international revenue in China, for us, tends to be more Hong Kong based; and there, we have not seen the same return. On a forward basis, what happens when you get that kind of confluence of both permissions and confidence? Well, then the other thing to overlay on top of that is what wins. Does pent up demand beat economic headwinds, travel budget constraints and human caution? And I think the answer to that will vary by industry sector. And so, then I think you then start overlaying a sectoral analysis on the geographical question. And here I'm giving you a very personal opinion. I think our pharma and healthcare shows will be more robust than our fashion shows just because they're less retail orientated. So, I think it depends on which sector you're in. But whether or not you could read across as sort of a 20% to 30% reduction year-on-year is, I think, very hard to tell at this point. On consolidation, I can't speak for other people in the industry, although I've spoken to many of them through this period. I think all of us are very focused on a combination of the day to day, the impacts on our business and our customers, and securing a long-term footing, albeit at a lower size and a lower scope for now. And that has been where our focus has been. And I think that will serve as well going into 2021. And as confidence and permissions return, I suspect that's probably when you're likely to see M&A become more of a feature.

Adrien de Saint Hilaire: And if I could just sneak in maybe one more question. So, you've generated about £100 million pounds of revenues outside of physical events. So, maybe something like £200 million on an annual basis. Is that going to remain when physical events return? Or should we completely strike it out of our model going forwards?

Stephen Carter: Great question. Again, I don't think we know. I think what is going to remain is the capability, and I think some form of the demand. Again, if you want to go back to my glass half full, let's imagine that you and I are still having these conversations in a couple of years' time when physical event activity is fully back. We will have built significant digital capability on an accelerated basis. Customers will have seen it. And I think it will give us the opportunity to extend our brands and our service offering to our customers. Some of it, I think, will be replicative, may have an impact on some of our portfolio. And I suspect it will mean that some of our smaller brands maybe cease to be physical and become digital. And it may mean, however, that we are layering continuing products and services, subscription-lite products on top of our physical event brand. So, I think on the other side of this, if one is looking for learnings and opportunities, I'm not sure I'd say whatever the number ends up being, £200 million is a little drop or £200 million disappears, but I think what will remain is a combination of our capability and customer experience and demand. And then, I think maybe you end up with the best of both worlds and certainly the product of both worlds.

Operator: We can now take our next question from Rajesh Kumar of HSBC.

Rajesh Kumar: Just on Taylor & Francis, could you give us some color on how the renewal discussions for the next year is progressing? The second question is on business intelligence. Clearly, we are looking at a very resilient performance. Quite a lot of industry players have been resilient as well. Do you see a potential sector consolidation opportunity in that space? And if so, when do you think you'll have the management bandwidth to focus on such opportunities?

Stephen Carter: I'll take them in reverse order. I think it's fair to say that the management has been busy. But having said that, we keep a very weather eye on what's happening in the information services market, particularly in the sectors that we operate in. And actually, particularly in the US, there has been quite a lot of activity as you will be well aware, I'm sure. And as I think I said in my opening remarks, we've invested quite a bit organically in our Intelligence business in the last few years, in people and in product and technology. We think that is serving as well. We remain committed to those markets, particularly to pharma. And so, we are alive to opportunities. I suspect for us there will be smaller scale targeted opportunities that have the capability of product extension in the part of the value chain that we operate in. But I think it's an interesting place to be. And I'm glad we have retained our businesses in that. Taylor & Francis, well, renewals are an ongoing cycle. I take it that you're talking largely about our subscription journal business. There, we don't renew 100% of the revenue on an annual basis. Some of those are in two year or three-year deals. So, there's a proportion of the revenue that renews. There's a proportion of revenue that rolls. We actually took an early decision in the middle of COVID in that business that we would go to market earlier on renewals for 2021 with, we believe, attractive and flexible term sheet for those customers who are willing to engage in earlier renewal discussions. And we think that will serve us well on forward visibility for 2021. The renewal discussions, like in every industry, but particularly in that industry, because some of the customers, not all, but some of the customers are facing their own economic challenges, are demanding more services, more product, more flexibility, more open access, more open research, more speed to market, and a greater level of tracking and tracing of usage and value. And we have built a lot of that capability into our business. So, I'm not saying it's getting any easier. But we have a high degree of confidence in our product offering. And I think our decision to go early in the 2021 renewal will serve us well.

Rajesh Kumar: So when you look at exposure by sector, do you see a different tone of negotiations in terms of Taylor & Francis?

Stephen Carter: I'm trying to make sure I answer your question, Rajesh. Can you give me a bit more color behind what exactly it is you're probing at?

Rajesh Kumar: So, by discipline, so do you see a greater degree of budget pressure in social sciences versus other discipline?

Stephen Carter: That's a very interesting question. Sort of yes and no is the answer. One of the strengths of the fact that our portfolio index is higher humanities and social sciences is that there is much less public money that is the funding vehicle for research in humanities and social science. It tends to be research funded in a different manner. And so, the tone – and I like your question. The tone, therefore, can be slightly different from what you might call the more generic tone that hangs around the discussions around hard science, which is often a heavy recipient of significant public funding or public body commissioning. Having said all of that, there is absolutely no doubt that our end customers, and this is true of every market, but our end customers, whether they be institutions or libraries or research bodies, they are all looking at for more flexibility, more products, more digital service, more control, more access, faster speed to market, and a greater level of usability and relevance of the research. That speaks to quality. And we're in the quality end of the academic research and advanced learning business. So, we feel confident in our product. We're not casual about that. But I think it is different in humanities than it is in pure science, yes.

Operator: We can now take our next question from Tom Singlehurst of Citi.

Thomas Singlehurst: I had a couple. The first one was on the sort of drop through. I suppose, if we're looking at the sort of the direct cost savings, roughly speaking, the £400 million of savings on £1 billion plus of revenue decline, is that sort of 30%, 35% drop through rate, is that, would you say, is typical and should we anticipate a similar sort of move in variable costs relative to revenue as and when recovery happens? I appreciate it might not happen in 2021, but would be – the rough proportion would be the same. That was the first question. And then, the second question was on postponing to mid to late spring. And I suppose the point being, surely, the most important thing for next year is simply that the events take place. So, I suppose the question is, if they're pushed back to mid to late spring, can they be pushed back yet again if necessary? Or is that one and done? Is there a risk that they don't happen by mid to late spring, you're going to have to cancel them again for the whole of 2021? Thank you.

Stephen Carter: I hope you're well. Let me take the second one, and then I'll let Gareth take the first one because I thought I tried to answer it and I clearly failed earlier. So, hopefully, Gareth will provide you with more clarity. On postponements, we've developed a bit of a core competence in postponement, Tom, because we've lifted and shifted many events. If you take 2020 as a case study, we have actually experienced the practical reality of what you ask at scale in North America because, initially, when we lifted from March, we largely moved to early summer and in some instances late summer. And then, as March went to April went to May, we then lifted again to Q4. And then, when it became clear over the full summer that the world was not coming back post Labor Day physically in North America, we've just moved them into 2021. So, short answer is, is it possible to shift within the year? Yes. But the reality is, you're then into capacity and concertina-ing and scheduling, and that does create some tensions. But I don't think spring is a drop dead date, done once, it's done. I think we do have an option in the back end of the year. And so, if the world becomes late summer or post summer 2021, I think we'll have some adjustment capability there. That would probably be our last fall back to 2021. So, the decision we've made for now is based on what we have seen and what we know and what we're seeing and through our pharma lens on vaccine trialing and therapeutics and what we've seen happen in the seasons that actually making that move to the mid to late spring is sensible. And that's how we've approached it. I hope that makes sense. Gareth, do you want to take the – what's the run rate on the drop through and 2021 question?

Gareth Wright: Yeah. I think Tom was coming from a slightly different angle to Adam earlier because I think Tom was focusing on the cost side of it perhaps more than the virtual event pickup side of it. But I'll answer on that basis. And Tom, if I got it wrong, then by all means come back. But I think what we're saying is that, we're going to deliver around about £200 million worth – £200 million plus of indirect cost savings by the end of 2020 on a run rate basis. And what we're saying is, for our baseline revenue case, in 2021, we can maintain those indirect cost savings. So, based on revenue, it's deliverable of the lower indirect cost number. After 2021, we'll make a call on whether we want to maintain those £200 million savings or do we need to build some things back as the business recovers and as revenue hopefully comes back into the business. But the business is, say, at a 1.7. 1.7 minus baseline revenue is manageable and deliverable with £200 million worth of indirect cost savings. So, the fixed cost base will stay lower with that number. In terms of the virtual events, how they come through, as Stephen said earlier, we're not really predicting at this stage how they're going to work. [indiscernible] profitable based on our experience in 2020 to date, but we're not going to make a call at this stage on how profitable we think they'll be at scale in 2021.

Thomas Singlehurst: Just to be specific, I suppose I was asking about the direct costs associated with any improvement in revenue. And I appreciate you're not going to commit to what the revenue will be. So, over the next couple of years, should we assume all of that £400 million of sort of direct cost savings will just be essentially reinvested? That's the right way of putting it or it will sort of come back into the cost base as the revenue recovers?

Stephen Carter: The way I would answer that, Tom, is no one will be happier than me if those direct costs return.

Operator: We can now take our next question from Patrick Wellington of Morgan Stanley.

Patrick Wellington: Three questions. At some point, Stephen, I think you said you had £100 million of virtual events revenue. And you also said you'd run 500 virtual events. So, that's £200,000 of revenue each. Is that a fair characterization of their potential? Secondly, on the impairment, if you look at the impairment, I think your modeling, the impairment says that you're operating cash flow doesn't get back to 2019 until 2025. If we were to swap the word EBITDA for the group as opposed to cash flow, would that also be a fair reflection? In other words that your impairment suggests that the group EBITDA won't get back to 2019 levels until 2025? And actually, two more. A quick word on rebooking on China shows. How's that going? Some sort of percentage number. And finally, I think it was the Hong Kong jewelry show. When the announcement was made that that was postponed. There was talk of it coming back, I think, partly as a hybrid show. So, are we saying that physical events will never be the same again? Or will we see a future that is always part physical and part hybrid? And what are the implications of that potentially for revenue? Thanks.

Stephen Carter: Let me try and cut into some of those. And maybe, Gareth, you can come in on the impairment one and perhaps also on the China rebooking one as well. On virtual events, that would be the neat math [ph], although one of those numbers is for the full year. I don't think I'm giving any secrets away. I'm looking at Richard as I'm about to give away a state secret. To say that, I think we have had some virtual events which have given us revenues north of £10 million. But that is the exception, not the rule. I think we would say we don't know yet fully what the revenue potential is because the products are very much in evolution and development. And the experience is often. And we've even seen that we've had one brand that has traded now twice as a virtual event in 2020. And the customer satisfaction at the end of the first one was 4 out of 10 metaphorically, and at the end of the second one was 7.5 out of 10. So, we have improved the customer experience on registration and on ease of moving around the event and on matchmaking and on product discovery and in the accuracy of the data. So, this is very much real time. I actually had this exchange with one of my board colleagues, who knows quite a lot about this analog to digital transition. And she was saying to me that some of her people had been at one of our virtual events, and one half of it done was very well and the other half, they found very clunky. And that was a pretty fair assessment of that product. But I reminded her that, our first or second mobile phones weren't so smooth either. So, when you're doing this stuff in real time, it really is product development in real time. So, I don't know and we're not giving a ceiling of revenue guidance. But to your question around – ally that to your question around the Hong Kong show, which is, I think, a little bit like one of the earlier questions. I think we are going to see quite a lot of hybrid products. And actually, that's not necessarily all bad because the hybrid product might allow us to do products extension, might allow the products to last for a longer period of time, might allow the product to operate in different geographies. But if you take a live event analogy, there is no harm in having a live event which is then intensified through using digital platforms. And if I've got a criticism of ourselves, and indeed our industry, because we were making more than a reasonable return and living out of the physical event, maybe we didn't put enough work or effort into how you extend the brand digitally. And this circumstance has driven us to that and we're learning a lot of, and I think it will be a feature going forward of the product. China rebooking, I wish I had a number for you. I don't know if we've got one to hand. But the headline is it's going well, and we certainly have had no issues on rebooking rates in China in any of our major shows, of which really the two biggest ones would be furniture and CBE and I definitely – I do know we booked well. On impairment. Look, our impairment was rightly prudent. But, Gareth, do you want to add any color to the EBITDA to group transfer?

Gareth Wright: Just on the China revenues, a lot of the Q4 revenues are already in the balance sheet at the moment from referrals from earlier in the year. And China always has a quiet Q1. So, you'd often be seeing a [indiscernible] 2021 rebooking being contractualized at this stage of the year. So, China at 80%, 90% of normal levels of trading because of that international dynamic that we mentioned earlier. And in terms of rebookings, we're comfortable where it is. In terms of impairment modeling, you're modeling financial results into the future. So, with the audience on this call, I'd rather kind of tell you what your day job is. So, I'm not going to get into how difficult that is to do at the moment as that's readily apparent to all of you. But we went through an exercise to try and measure the extent of COVID over time, to look at the depth of the economic impact, look how [indiscernible] come back. And we added all that up to give, as Stephen says, a prudent view of what we think the world is. And that prudent view says we don't get back to cash flow or EBITDA levels, to Patrick's question, until 2025. But let's say, we're hoping that's a prudent view of life and that the reality will be better than that.

Operator: We can take our next question from Matthew Walker of Credit Suisse.

Matthew Walker: Just a few questions, please. The first one is, you're looking for what looks like fairly stable subscription revenue next year. Given the issue around library budgets and books, how can you be so confident on that? That's the first question. The second question is on cost savings. If you really do have £1.7 billion of revenue next year, would you not look to get a bit deeper into indirect cost cutting? And then, the final question is, I missed what you said about working capital and free cash flow? But did you say that you were looking for £100 million outflow on working capital in 2020 or in 2021? And if you get back to free cash flow breakeven, what does that imply as an EBIT number? Thank you.

Stephen Carter: I think we are predicting fairly stable revenues in our subscriptions businesses, and we're not casual about that. But I would contextualize it. And the problem is that the context is dramatic. We're not taking it for granted. But we're – looking at the shape of 2021, how do we get to a place whereby we feel stable and secure in our liquidity and our financing? I think an assumption of flat year-on-year subscription revenues across the entirety of our subscription-led businesses is a credible assumption. We have powerful brands in powerful markets. We will see growth in Informa Intelligence this year. I see no reason why we couldn't mobile that to make sure that we haven't in that shape picture I gave you. I think the place where there will be challenge, as you rightly say, is in the advanced learning business. But even if we saw a repetition of this year's challenges, but driven by economic headwinds rather than necessarily COVID-19 direct impacts and there was a 1% or 2% revenue decline in the shape of that picture, I still think that would qualify as stable subscription revenues by comparison to the overall context. On the cost savings, you're correct. But in the model that we have laid out, we can still see a place that gets us to operating positive cash flow from January, whilst reserving some capability in our indirect costs to come back at the market in North America and EMEA, if it returns. Now, if it does not return, then, of course, if the facts change, you change your approach. But what we're saying here is, we don't need to make that change to get us to that point of security for 2021. But would we? Yes, we would. Gareth, do you want to pick up on the cost savings and the – sorry, working capital and the free cash flow?

Gareth Wright: On the working capital. So, where we were was we had about £40 million inflow in the first half of the year. And what we're saying is that we're modeling for a full-year outflow of about £100 million. So, basically, £140 million outflow in the second half of the year. That's what we're looking for. And I think that comes from a combination of deferred income earned out of the balance sheet and we're not expecting an acceleration of sales in terms of H1 2021 because of the Postponement Programme to mid to late spring. You factor that in, we think that, overall, that gets you to a free cash flow number for the full year – free cash flow outflow of somewhere around about £300 million. But that includes – you should note, in our modelling, we're including the £160 million PP make-whole payment in that, and we're including further restructuring costs of around about £100 million for the second half of the year for exceptional and for the extra indirect costs that we're taking out. So, I hope that gives you some idea of the shape of the numbers we're expecting for the full year for 2020.

Matthew Walker: But just on the question about free cash flow, the ambition to be free cash flow breakeven from January onwards next year, what does that imply as an EBIT number? Is there much difference between basically breakeven, free cash flow and the EBIT number?

Gareth Wright: We would say that that benefits from [indiscernible] the £60 million extra indirect costs that we mentioned earlier are in the £200 million number, but don't benefit 2020. So, they come in on top of the cost savings that we benefit from in 2020. And then, in terms of EBITDA, we'd say there's about £90 million, £80 million of depreciation amortization. And that gets you kind of to an EBITDA number in the low 400s, which is where we're starting from in terms of kind of consensus and our broad understanding of the 2020 numbers.

Matthew Walker: So, was that 2020? I was asking about 2021.

Stephen Carter: Yeah. In terms of 2021.

Operator: We can now take our next question from Annick Maas of BNP Paribas.

Annick Maas: I'm starting off with a bit more an open question and that we get to the end of it. So, we are six months into the pandemic. I assume you've engaged and spoken with many stakeholders. I'm keen to understand how do you think the event world post-COVID will look like? Will there be more niche events, more bigger events, only small events, less cloning, if you could comment on that? Second one is a follow-up on Patrick's question. Maybe you could just compare the digital revenue generation between a key show, let's call it, the CPhI or a tier 3 show index versus the equivalent physical? Or is it just fair to assume that only the top 50 events can generate digital revenues? And my final question is on rebates. So, first of all, has there been a meaningful change in the rebate request over the last few months? And also, how do rebates change for an event that was first postponed and then has been canceled? Thank you very much.

Stephen Carter: Interesting questions. Just take the last one first. No is the short answer. We've seen no change. Forward booking and forward commitment on rescheduled shows, recently rescheduled shows is not materially different from what it was previously. And there has been no material change in rebate from our levels. On your macro questions, which I think are interesting questions, let me take the first one first. If you want to take a macro picture, so let's imagine, not least because it's enjoyable to imagine it, let's imagine we get to the other side of COVID-19 in whatever that means, either we learn to live with it or the therapeutics get better or the particular strain of this disease mutates to a level where it's less pernicious or hospital admissions and death rates go to do a de minimis level or we get a vaccine which either controls or cures. So, some version of life the other side of COVID-19. The event industry really happens in about 15 locations in the world. And every single one of those locations is going to be very, very keen to bring the world back to those locations. We talk about what does it mean for our business and our customers because that's what we do. But if you're the City of Shanghai or the City of Shenzhen or the City of Orlando or the City of Vegas or the City of Dubai or the City of Paris or the City of Frankfurt or Berlin, the decline of business tourism has a material commercial impact. And so, I think one of the macro things you're going to see is a significant drive from city governments, state governments and national governments to reintroduce the world to each other. And similarly, the actors in the travel industry, in particular the airline industry, and whilst there is a general thrust that's coming out of the airline industry, so there's going to be a shift to domestic, there's going to be a shift to tourist travel and corporate travel may be one of the last sectors to come back. And therefore, there may well be some shifts in global air capacity. Nevertheless, the yields in global air capacity are not going to come as easily from domestic as they do from business. So, I think a combination of the venues, the cities, the locations, and the travel partners, there will be significant interest in encouraging and incentivizing and driving volume. What will return takes, as you say, back to Patrick's question, in my view is a mixture. You will see more and more use of digital service delivery around the product. We were doing that anyway pre-COVID. That will increase. There will be a greater demand for accuracy and efficacy in meeting schedules, in pre provision of data, on product discovery, on directories, on pricing, on product applicability. And so, I think the nature of a pure physical and pure virtual or pure digital, even in a world without COVID, will blur. Bear in mind, when we get to the other side of this, the ESG implications will be even larger. And therefore, the effectiveness of the event will become, I think, a bigger criteria. And on your question around key shows, at a headline level, you're correct. When we look at our forward planning, we definitely see an easier route to digitization and virtual service delivery on our top 50 shows than we do in our next 100 shows. But if you ask a question about revenue yield, so far we have discovered that the revenue yield is higher, virtually or digitally, in the shows where they're more content rich than they're transaction heavy. So, if the community you're bringing together is long on learning, professional accreditation, training, audience engagement, speaker content, con-fessing to use the jargon, then actually that's easier to transplant quicker to digital and virtual. If your show is a massive, large scale, thousands of exhibitors or hundreds of exhibitors and thousands of attendees transaction-based event, then actually we haven't yet fully built the infrastructure to transfer that on to digital and virtual. And we're doing that in real time.

Operator: We can now take our next question from Sarah Simon of Berenberg.

Sarah Simon: I've just got a couple of small ones. On the redundancy program that you're starting now, can you just give us an idea of what percentage of your, let's say, of the addressable employees that represent, so we can get a feel for the scale? Secondly, obviously, appreciate you're kind of trying to give us a baseline picture. But can you just confirm that the revenues on physical events that you've been talking about are purely mainline China? Because, obviously, you've got physical events in the Middle East and some Europe and stuff, I think, still scheduled for the rest of this year. And then, the final question was just clarification. So, in terms of cash exceptional costs this year, is that about £140 million or is it £100 million? Thanks.

Stephen Carter: If you don't mind, I'll pass on your first question. We're only announcing this internally today. I think the key point is on the slide – the step slide, which I laid out when we were doing the presentation. We are sadly going to have to lose some colleagues through a compulsory process. It will be focused in our events business for obvious reasons in North America and EMEA. As a proportion of our savings, one of the things that's allowed us to minimize the impact of that has been everything else we've done, but it will affect individuals. And I'd like to work that through. In terms of capability, we are very confident that the previous steps we've taken still allows us to retain a high degree of capability. So, we're in the low percentage points impact. But to put a specific number on it, either in roles or people or percentages on defined population, I won't do that. Not least because we will be going through consultation in some geographies. The baseline. Yes is the short answer. It pretty much is. We have got a couple of spot outdoor events in a couple of places, but in the main, the baseline is the baseline. On your last question, Gareth, do you have an answer?

Gareth Wright: So, we reported about £40 million in the first half of the year in terms of cash outflow for exceptionals. And what we were saying is that we would probably spend £100 million more in the second half of the year. It's all good work in progress because we're still finalizing the cost of the indirect cost savings we're going to deliver. But that gets you to a full-year number, more like £140 million rather than the £100 million number, which was the alternative new process.

Stephen Carter: Adam, I'm going to make this the last question unless you get an outbreak of a riot on the call.

Operator: We actually have no further questions on the call today. So, I'd like to hand it back to the speakers for any additional or closing remarks.

Stephen Carter: How good is that? Well, listen, I'm very appreciative of people's time. One of the advantages of these virtual events is we can track how many people have stayed with us. And actually, we've had – doing my relatively quick math, we've had 80% of the attending audience have stayed all the way to the end. So, that's good. Not bad. So, thank you very much. These are sobering results and forward outlooks to have to give. It's not where, in January, we wanted this business to be. But it's sobering, but we hope secure and that is the way we're managing this business. And on a personal level, I wish everyone on the call well. Thank you very much for your time.

Operator: This concludes today's call. Thank you for your participation. You may disconnect.