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Edited Transcript of UBM.L earnings conference call or presentation 28-Feb-18 10:15am GMT

Thomson Reuters StreetEvents

Full Year 2017 UBM PLC Earnings Presentation

London Mar 1, 2018 (Thomson StreetEvents) -- Edited Transcript of UBM PLC earnings conference call or presentation Wednesday, February 28, 2018 at 10:15:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Marina M. Wyatt

UBM plc - CFO & Executive Director

* Tim R. Cobbold

UBM plc - CEO & Executive Director

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Conference Call Participants

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* Christopher Anton Giles Collett

Deutsche Bank AG, Research Division - Research Analyst

* Nick Michael Edward Dempsey

Barclays Bank PLC, Research Division - Research Analyst

* Thomas A Singlehurst

Citigroup Inc, Research Division - Director and Head of European Media Research

* William Henry Packer

Exane BNP Paribas, Research Division - Executive Director of Media Equity Research

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Presentation

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Tim R. Cobbold, UBM plc - CEO & Executive Director [1]

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All right. Well, good morning, and welcome to the presentation of UBM's preliminary results for the year ended 31 December 2017. For those of you who don't know me, I'm Tim Cobbold, the Chief Executive, and with me today is Marina Wyatt. Now this is going to be a perfectly regular results presentation, but of course, we do give it in the context of the UBM board having recommended the offer for Informa. Now just by way of reminder, the board believes that the terms of that offer are compelling for UBM shareholders and that they represent an attractive valuation for UBM and allow UBM shareholders to participate in the ongoing value creation that is arising on the combination of those 2 businesses. So that -- in that context, we're now going to give a perfectly normal results presentation. So the running order -- well, there's normal disclosure. The running order for today is, I'll take you through the highlights of the results that we announced this morning before handing order to Marina, who'll take you through the detail of the financial performance. I'll then return and give you an update on the progress that we have made implementing the Events First strategy before concluding with the summary. Now of course, clearly, we are in an offer period. And so that means that, Marina and I will be somewhat restricted on what we can say about the outlook. And I'm sure you will understand that and I hope that you'll respect it.

So in my view, 2017 was the year in which the Events First strategy really demonstrated its value for shareholders. We set out to be a pure-play events business and as you can see in '17, more than 94% of the profits were generated by Events. In fact, if I included the profit from those OMS activities that are closely aligned to Events, that ratio would be higher than 95%. Now we chose Events because of the attractive characteristics of that industry, specifically a strong organic growth dynamic that can be supported by accretive value enhancing bolt-on acquisitions, high margins and strong cash flow. And I think when you look at UBM's results for 2017, they reflect the characteristics of the industry upon which the business is now focused, and they should do so. But none of that's to say that there isn't scope for further improvement. Turning now to the reported results for the year. I think it's worth remembering that 2017 was a biennial up year. That means there's a material positive impact at revenue, profit and indeed margin. And we had a strong FX tailwind. And it's those 2 factors when combined with the consolidation of Allworld for the first time and good organic growth in 2017 that has driven the growth in revenue, profits and margins that you will have seen. Now the only thing I'd add to that is that we've had a very good drop-through of organic growth to profit. And of course, therefore, the profit and margin has benefited. The diluted adjusted earnings per share was up 34.5% to 53.4p and the board has declared a final dividend of 18p to give a full year dividend of 23.5p, an increase of 6.8% on 2016. So that's the highlights for the year. And with that, I am going to hand over to Marina.

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Marina M. Wyatt, UBM plc - CFO & Executive Director [2]

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Okay. Good morning, everyone. So let's go into the financial performance in more detail now. So if we start with the headline numbers here, what we see is strong progress on all of the headline metrics, really without exception. So reported revenue is up 16.2%. Constant currency, it's up 13.3%. And in that, we've got a combination of organic growth, the inclusion of Allworld in the results for the first time. And also, as Tim has mentioned, that impact of the higher up year biennial revenue. Adjusted operating profit is up 25.3% to GBP 294.2 million, and constant currency is up 21.8%. And in addition to the factors I've just mentioned, we also saw margin improvement in Events, and we also benefited from the fact that in the up year, we have a better mix effect on margin from our biennials as well. Diluted adjusted earnings per share is up 34.5% to 53.4p and constant currency, it's up 29.7%. And the other thing in EPS to remember is that it's positively impacted by the 2016 share consolidation, which has an impact there. So -- and Tim's mentioned the dividend, which is reflecting a 6.8% increase over last year's dividend, so an accelerated rate of increase in the dividend.

So looking at revenue, it's the usual revenue bridge here. So revenue increased from GBP 863 million on the left-hand side to just over GBP 1 billion on the right. On the right-hand side, you see the normal impact of FX, which I always put on the right. We had a positive impact of GBP 25.8 million on FX. And then if you go over to the left, the first green block of GBP 80.6 million there shows the positive impact on revenue from acquisitions, trading for the first time under UBM's ownership. So most of this is Allworld, but it also includes part of BJI and also the Battery Show. And that number is net of GBP 17.5 million of revenue, which did not recur in 2017, related to the disposals of Electronics Media, Ecobuild and 4 U.K. events. Next over, you see GBP 22.5 million of strategic rationalization and that's split pretty evenly across Events and OMS. And as a reminder, 2017 was the final year of the strategic rationalization program. So going forward, whilst we will always have some level of discontinuations, that level will be lower and we will not call it out separately or adjust the revenue growth for it. In the center, you see GBP 34.8 million of revenue growth from the pre-existing Annual Events portfolio. And in the dotted box above, the adjusted underlying growth rates for Annual Events increased, as we said it would, to 5.3% from 3.1% last year. And that's mainly the result of higher growth from the existing portfolio with, as expected, a small contribution to the growth coming from Allworld, again as previously indicated. OMS revenue was down by 2.2% on the adjusted underlying basis.

We move across to the biennial revenue box. You can see the -- this is the UBM existing biennial portfolio. So it doesn't include Allworld. And that was up GBP 24 million and that's because of the large odd year biennials. These biennials grew by 3.7% on a compound basis or by 7.6% addition on addition. So -- and that's reflecting good growth of food ingredients, partially offset by expected softness at MarineTech. So then if we move on to look at the adjusted operating profit. So left-hand side, GBP 234.8 million in 2016, grew to GBP 294.2 million in 2017. On the right-hand side, we see the FX tailwind of GBP 8.6 million in profit. And then on the left, the same column for acquisitions net of disposals contributing GBP 28.7 million.

Moving across to the right, GBP 16.3 million of profit uplift came from the growth in the pre-existing Annual Events portfolio. And that reflects a drop-through of the corresponding revenue growth of 46.8%. Profits from OMS declined by GBP 5 million, reflecting Life Sciences print advertising declines. Biennial profits were up GBP 12.8 million and that reflects that more profitable up year portfolio in the UBM biennials. Corporate costs and strategic OpEx were GBP 2 million higher than in 2016 and that's owing to one-offs, which I'll come onto further on. Then if we do the same chart for EPS. So diluted adjusted earnings per share, 1.9p from FX on the right-hand side. And then going back to the left, 2017 was the first full year with the post-share consolidation number of shares of GBP 397.2 million. And that the corresponding benefit from that was 2.2p. And then moving across, the combined operating profit uplift was, you know, the big contributor here, adding 12.4p per share. The interest charge moving across was slightly lower and that reflects the redemption of the sterling bond on its maturity in November 2016 and only half a year of the U.S. Private Placement debt in 2017. The higher tax rate of 16%, compared to 14% in 2016, took 3.2p off the EPS and minority increase -- minority interests increased very slightly, but that's a positive thing reflecting positive performance in our Asian joint ventures. So looking now at currency, because this is very important. On the right, you can see that in 2017, 70% of revenue is denominated either in U.S. dollars or in currencies either pegged or quasi-pegged to the dollar. 44% of revenues are U.S. dollar, 13% in each of Hong Kong dollars and renminbi. And the mix of dollar and dollar-pegged currencies in 2017 was a bit different to the previous year because of the inclusion of Allworld and the impact of the biennial up year. On the left, you see the impact of the movement in average dollar rates from GBP 1.35 in 2016 to an average of GBP 1.28 for 2017. And this resulted in the uplift of GBP 25.8 million in revenue and GBP 8.6 million in profit, the tailwind that we've seen on the previous waterfall charts. And all of that tailwind really happened in the first half of the year. And at the bottom on the left, we've illustrated the hypothetical FX impact on 2017's results, had the dollar and dollar-pegged currencies been reported at current spot rate, so we've used GBP 1.40 here. And this would've resulted in revenue and profit being GBP 54.7 million and GBP 16.8 million lower than what we've reported, so just to understand that impact. Corporate costs and strategic investment. At the first subtotal on this chart, you see total corporate costs of GBP 23.7 million and it's slightly lower than last year's GBP 24.1 million. There were 2 nonrecurring costs. We had some restructuring costs related to central functions. And for the second year in a row, we had a pension gain, as we completed an additional phase of the pension increase exchange program. That's now finished. Strategic operating expenses at the bottom of the page. So it's the last year we call them out as strategic operating expenses. They were GBP 0.5 million lower than last year at GBP 6.7 million, while strategic CapEx increased to GBP 9.2 million, as our programs -- our strategic programs shifted into the systems implementation phase. So that's what caused that.

We then look at the usual adjustments to the income statement. At the top, amortization of acquired intangibles increased to GBP 64.5 million and that's principally because of the Allworld acquisition. And moving down, if you look at the exceptional items, we incurred further integration costs in the period, and that's associated with Advanstar and BJI and beginning the integration process for Allworld. Both the Advanstar and BJI integration is completed with total costs coming in at USD 40 million, which was slightly lower than the $43 million we'd originally indicated and there were GBP 5.1 million of integration costs on Allworld and that's principally relating to restructuring and consultancy fees for the operations and finance integrations. And looking forward, we continue to expect to incur total Allworld integration costs of around USD 20 million and the balance will be incurred over this year and next.

Moving down, net acquisition costs and earn out changes were GBP 1.1 million. And then in September 2017, we disposed 4 Events businesses in EMEA and that resulted in the GBP 2.6 million gain you see here. And further down, transaction costs of GBP 2.4 million relate to fees incurred in 2017, in respect of the Informa bid.

So now if we look at Events in more detail. So adjusted underlying revenues, as I've said, on Annual Events was 5.3% up. And then the underlying revenue, where we backout the impact of the strategic rationalization was a growth of 3.6%. If we look on the right-hand side column here and look at adjusted underlying performance by region. In North America, we had good growth in technology, advanced manufacturing and transport and logistics. And we also had a strong launch from CPhI North America. So growth coming in from that and that's offset by lower revenues from Fashion, the Life Science's small events portfolio, which is the CBI conferences and Interop. China delivered 9.4% growth, with particularly strong growth in lifestyle, food and hospitality and pharma. And we had jewelry returning to growth, but growth at a lower level, which pulled that back a little bit.

Emerging markets growth of 6.5% was fueled by strong growth in Southeast Asia. And that's notably from ProPak Asia, which is an Allworld event and Renewable Energy India, a UBM event. And then we had a bit of weakness in Turkey and Brazil, which are much smaller markets for us.

In the U.K., we saw return to growth with revenue up 5.7% and that was driven by our technology and lifestyle events, particularly Black Hat Europe and Brand Licensing Europe. Continental European revenues were up 10.2% and that particularly came from the CPhI Worldwide and colocated events, so our pharma portfolio. And a strong performance at world routes, which was held in Barcelona. The rest of the world was up -- it's a smaller part of the business, but it was up 24.8%. And here, we had 2 launches, spring and fall editions in the Fashion portfolio, which took place in Japan. The tables at the bottom show reported adjusted operating profit and margin, and remember, this is reported, so we've got Allworld in here and FX. What we see on the right is a 0.9 percentage point uplift in the Annual Events margin to 33.2% and this is coming from stronger organic growth, procurement savings, the benefits from rationalizing events and also from the FX tailwind, which I mentioned. And also you get a better recovery of overheads in the biennial up year. And then, offsetting that slightly was the impact of the declines in Fashion and also the lower margin associated with new launches. So that pulls it back a bit. And then, we see the biennial margin increasing very strongly from 29.3% to 42.5%. And that improvement is driven by a couple of things: it's including Allworld's biennials now and they have a higher margin and that -- and particularly that was HOFEX and Food & Hotel Indonesia. And then, we have strong margin performances from our own biennial up year portfolio and that's particularly food ingredients and MarineTech.

If we look at OMS. So OMS had a decline in revenue of GBP 14.9 million to GBP 136.5 million and this was largely -- I mean, there was significant amount of disposal and rationalization in that reduction and they together contributed GBP 18.5 million of revenue in 2016. We also had declines in Print and we had some growth in online and also a bit of an FX tailwind that was GBP 3.1 million. Adjusted underlying revenue was down 2.2%, with online activity showing growth of 4.8%. Although this was more than offset by print, which declined 11.6%. Print decline was faster than predicted because of softness in Life Sciences because of particular uncertainty in the U.S. health care market, back end of 2016 and through 2017. And this impacted print advertising spend. So we took some action to reduce cost in that business towards the end of 2017. The adjusted operating profit of OMS was down GBP 4.7 million to GBP 19.4 million. And in the bottom right, you can see the margin was down 1.8 percentage points to 14.2%, partly reflects the disposal of Electronics, which had a stronger margin, but also the weakness in the Life Sciences Print advertising that I mentioned.

Since year-end, we've disposed of some small media asset serving the U.S. fashion and U.K. construction sectors. And in 2017, these contributed GBP 7.5 million of revenue to OMS and a small amount, GBP 0.9 million to Events.

So we move on to tax. So we had a 16% tax rate in 2017. In the third column from the left, you can see that the tax rate at statutory rates based on our geographical mix was 28.2% and this was down from 29.6% in 2016, due to the change in the mix of profits, especially relating to Allworld coming in. Moving right, the rate falls from 28.2% to 16% with the usual 2 big contributors there: U.S. goodwill amortization and the impact of intragroup financing. We saw other adjustments of 2.4 percentage points, which included tax losses we couldn't use and permanent disallowables. In December, we saw the U.S. Tax Cuts and Jobs Act coming through and the combined effect of the various changes will not have a material impact on the group's adjusted tax rate. And we previously gave guidance that, that would increase to 16.5% in 2018 and 17% to 18% for the medium term.

We move onto cash flow. So the group generated cash from operations of GBP 295 million with cash conversion of just over 100%. So CapEx of GBP 20.9 million was higher than last year, but remember that includes the GBP 9.2 million of strategic CapEx spend that I mentioned before, which was mainly on the new CRM platform. And going forwards, should be thinking of between GBP 15 million and GBP 20 million. Working capital reduced, as you'd expect, in the biennial up year and nonoperating items during the period are cash expenses relating to acquisition integration, and these were slightly higher than last year. Payments for provisions and pension reduced to GBP 8.7 million from GBP 15.2 million last year, whilst interest and tax increased slightly to GBP 66 million. Moving across to the bottom, you see dividends and ESOP-related share purchases, totaled GBP 104.4 million. And then, acquisitions, we spent GBP 69.9 million on the period -- in the period on acquisitions net of disposals, GBP 48.4 million of that was the final part of the consideration for the Allworld acquisition, which happened in early 2017. GBP 13.6 million were spent on 4 bolt-ons with the balance on acquisition costs and contingent and deferred consideration for acquisitions from prior years.

So if we then move to the final slide, for me. So here we look at financial policy and net debt. So our financial policy, as you well know, targets leverage of between 1.5x and 2x net debt-to-EBITDA. And then, we have flexibility to operate outside this for periods of 12 to 18 months, up to an outer boundary of 2.5x and a lower boundary of 1x. So the changes in the leverage period -- profile, if you look at the top left here, over the 4 years shown here, reflect the actions we've been taking to reshape UBM over the period. And then in 2017, we have, as expected, seen significant delevering and that's because of the cash generation, which comes with being a much more events-focused company. And this coupled with the low level of bolt-on acquisitions in the year reduced the leverage ratio from 2.3x at the end of last year on our pro forma basis to 1.6x at the end of 2017 and brought the group back within the target leverage corridor. Net debt was down GBP 85.5 million to GBP 511.3 million at the end of the year that you see on the bottom left here. And since the year-end, we've signed 2 bolt-on. In fact, we've completed 2 bolt-on acquisitions with combined initial consideration of GBP 9.6 million. Bottom right, you see in 2017, the significant improvement in our debt profile. The detail of our debt funding is all set out here, but we've got USD 720 million of long-term fixed maturity debt with stacked maturities stretching out to 2027. And the blended interest rate on our debts based on the end of 2017 was 4.29%. Thank you. I'll now hand back to Tim.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [3]

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Okay. Someone help me a bit with this. Can you turn to the next slide, please? I could actually do it without the slides, but that wouldn't be very helpful for you, I think so. Turning it on. Thank you, Marina. A gift that keeps giving. There we go. So the focus of the Events First strategy has always been on shareholder value. When we launched the strategy back in 2014, we did so with 3 strategic objectives: To accelerate growth, deliver an attractive margin and build the best platform. Now what that has meant in practical terms in the period since 2014 is 2 things happening in parallel: The first, a reshaping of UBM towards Events and improving the quality of the underlying portfolio. And then, secondly, sharpening the focus on performance. So starting with the first of those, the reshaping of UBM. 2014, we acquired Advanstar and in the 3 years that we have owned that business, it has delivered a return on invested capital well in excess of our weighted average cost of capital. But as you can see, in 2017, the return declined in the face of market challenges in the fashion and life sciences part of that portfolio. In Fashion, Fashion is facing an ongoing structural change and that forced revenues in our Fashion sector down by just under 5%. In fact, that 5% decline is flattered by 2 launches in Japan. If you back those out, the decline is near 7%. And we certainly don't see that rate of decline improving through into 2018.

Now we have a very comprehensive response plan in place with further judicious investment in the shows despite the negative impact that has on margin. We're going to make sure that we trade the fashion niches, not the general trend in fashion. In the U.S., we've reshaped the fashion calendar to provide more value for customers. And then, fourthly, also in the U.S., we're going to launch a new show that focuses on the new fashion supply-chain. Now turning now to Life Sciences. Here, the market challenges are a little bit different. Fundamentally, revenues in that sector are driven by the approval of new drugs by the FDA and the advertising revenues that then follow, albeit with quite a significant time lag, order of magnitude 6 months. Clearly, that industry as a whole is not helped when there are lots of discussions about Obamacare and whether it's going to continue or not continue. We certainly regard the market challenges in Life Sciences as transitory and it happens that after a period of low drug approvals, the early part of 2018, we've seen the rate of drug approvals increase really quite significantly. Throughout this period, our share held steady. In fact, it grew marginally. So although it is transitory, nevertheless, we implemented a strong cost base program right at the end of 2017 to underpin margins in Life Sciences going forward. Now as you know, next thing that happened was in 2015, we announced the disposal of PR Newswire, but we only finally got that done in terms of cash in the middle of 2016. And you know, we returned half of the cash proceeds to shareholders, retaining the other half of those cash proceeds, which we subsequently reinvested in Allworld at the end of 2016. The news on Allworld is good. The integration is progressing really well. Allworld is really part of UBM, it's part of UBM Asia. Overall, the business is performing ahead of its acquisition case, its business plan. And as you can see, the return on invested capital in the first year was just over 6%. We remain very confident of delivering a return in excess of the risk-adjusted weighted average cost of capital in 2019, which is the third year of our ownership. Now it isn't absolutely perfect, things rarely are, revenue is actually a little bit lower than we had planned for, in the face of 2 things: First of all, some market-based challenges in the Oil & Gas shows. And secondly, we had 1 or 2 synergy programs that have slipped from '17 into '18. But to be clear, on a cumulative basis, the revenue synergies in 2018 are absolutely on track. So if you think about those of 3 moves, the big moves that reshaped UBM, now let's think about the work we've done to improve the quality of the portfolio itself. We spent about GBP 125 million over that period on bolt-on acquisitions. And in aggregate, those acquisitions delivered a return on that invested capital of 13% in 2017. In fact, none of those acquisitions has failed to meet the business case return on invested capital, which I think speaks very well to the disciplines that we have in place surrounding the process for bolt-on acquisitions. Now you will have seen that in 2017, actually our spent on bolt-on acquisitions was pretty low. I explained at the half year that actually we'd walked away from 1 or 2 larger bolt-on acquisitions and time has shown that those were some of the best decisions that we made during the course of 2017. But I also said that our pipeline at that time was strong and you will have seen we completed some acquisitions, 2 or 3 of them, in the second half of the year, and as Marina has mentioned, have already completed 2 further acquisitions at the start of 2018, despite doing some other things at the same time.

Now moving in the other direction. Of course, we've had the program to rationalize and/or dispose of lower margin or lower growth events and OMS activities that are not well aligned to Events. In aggregate, give or take, something like a GBP 100 million worth of revenues have left the business over that period. But we've been able to do that and increase as a result of that the absolute profit in the group and of course, that means that the margin has benefited as well. And the reason we've been able to do that is that, as those businesses left the group, we were very focused on making sure the related costs moved as well. There is no stranded overhead as a result of those departures. And that's why that program took 3 years. So what's the result of doing that? We're doing this right. So in my view, what we have created now is a large, high-quality and I think, and clearly some others do as well, very attractive Events portfolio. It is large. It is just under GBP 900 million worth of revenue. Now when we talk in terms of quality, we think of quality in a number of different ways. Looking towards the top right of the slide, the first way we think about it is in terms of a focus on the larger events. We call them the majors. The reason we focused on the larger events is: first, they tend to grow quicker and they certainly deliver the largest volume of absolute growth. The second reason is they tend to have higher margins because the gearing works at an event level. And the third reason is that when the cycle turns against you, they tend to be more resilient. Let's give you a sense of scale. We have more than 40 events that have a revenue of over GBP 5 million. So turning to the bottom left-hand side of the slide, the second way that we think about quality is in terms of geographic breadth. Clearly, the task here is to make sure that we're not overexposed to any one geography, while still able to access higher growth geographies. Essentially, our portfolio is about just over 40% in North America, that's pretty much in line with the industry as a whole, a very important marketplace. Emerging markets account for 45%, give or take, of the portfolio, 3/4 of that is China and Hong Kong, if I can include Hong Kong in emerging markets. The vast majority of the rest of that emerging markets is India and ASEAN post Allworld. Importantly, that leaves 15% that is covered by EMEA and the rest of the world, which in UBM largely means, Japan. Moving to the bottom center of the slide, the third way that we think about quality is in terms of sectoral diversity. And as you can see, we have a diverse portfolio, 11 sectors. The largest of those sectors is Fashion, which accounts for only 17% of the revenues. And of course, the point in sectoral diversity is that it allows the portfolio as a whole to perform even when 1 or 2 of those sectors aren't. Now nothing is absolutely perfect in terms of a portfolio and it is certainly true. If you look to the bottom right, that the performance of a portfolio business in one period, that period is not necessarily representative of another period. And it happens that our portfolio has a phasing bias towards the second half of the year in terms of revenues, profits, margins and indeed, in terms of growth. So worth bearing in mind. Exactly similarly, when it comes to biennials, there is a phasing bias towards odd years. And it happens that the biennials that take place in odd years have significantly higher margins than the biennials that take place in even years. So the bias, in terms of profit towards odd years, is much greater than it is in terms of revenue. But there's a fourth way that we think about quality and that's this way. We think about quality in terms of the potential of the sectors that we serve to grow, having regard for the geographies in which we serve the needs of those sectors. So the way we think about this is, in terms of the macro trends, which I've sort of given you 3 examples, there are some others. And we think about how those macro trends drive the level of activity in the sectors. So by way of example, I don't think it's too hard to see how a growing and increasingly affluent middle class in Asia would drive, for example, growth, fourth one, down in food, hospitality and leisure in Asia. That's the way we think about it. So if I point you towards the middle of the slide, what you can see is that of our 11 sectors, all but one of them, we think, has the potential to grow. And now let me emphasize, it's the potential to grow doesn't necessarily mean we deliver to that potential in any given period. And of those sectors, all but one, in our view, has the potential deliver good or strong growth. The one that doesn't, is Gem and Jewelry, because at the moment Gem and Jewelry, like some other luxury products, is returning back to growth. So we have a growth portfolio. So if that's our potential, what about actual performance? So if you look towards the left-hand side of this, this is the growth performance and -- of those sectors in 2017. And what you can see is that 7 of our sectors delivered good or strong growth, 2 others delivered solid growth and just to point it out again, really good to see that Jewelry and Gem, an important sector for us, grew by 1.8%, confirming that return to growth. Now actually that picture, in terms of the growth profile by sector, is pretty much in line with what we said at the interim results way back in July. The only difference, just to point it out, is that Life Sciences, actually our smallest sector about 3% of revenues, was a little bit weaker than we had expected. It's actually -- it happens that one is really quite back end loaded. But actually a picture that we had and we shared with you when we did the half year results. Now what I think is interesting, if you look towards the right-hand side and say where is this sort of growth coming from, if I don't look down the sort of sectoral dimension. The top right, the chart there shows the distribution of the absolute value of the growth by size of event. Basically, the greater the area under that blue line, the broader the spread of the growth across events. But of course, what's also very clear from the information on the side is the importance of those platinum events to the absolute value of growth. It makes sense to focus on the larger events because they deliver the vast proportion of the growth. The platinum events are all events over GBP 5 million and as you can also see there, they grew by just over -- well, 6.7%. Gold events, that's GBP 2 million of revenue to GBP 5 million of revenue, grew by 6.5%. I can tell you that's a very significant improvement on 2016. But clearly, on silver events, we still have some work to do. As advertised, actually, at the half year and the characteristic of our portfolio, you can see that growth was heavily weighted to the second half of the year. Finally, just in terms of being helpful, we've laid out here the contribution to that overall adjusted underlying growth rate of 5.3%. So Allworld contributed 0.3 percentage points to that 5.3% and that's actually a little bit lower than we had indicated before because of the little bit of that softness in revenue that I referred to before. Fashion, of course, represents a drag on the overall growth rate, give or take, 1.5 percentage points. But offsetting that is the impact of new launches of 1.5% in this year. And that's probably a little bit higher than we would normally expect to see because as you might recall from the half year, we had a very successful launch of CPhI in North America in the first half of the year, which went as they say, platinum on its first edition. The good news is it's trading very well with regard to 2018.

So that's the performance of the portfolio. Now let's turn to this question about sharpening the, if I can put it this way, the focus on performance. And this is really about being focused on delivering an attractive margin and building the best platform. Now the half year, again, we told you that we had set ourselves a medium-term margin goal, certainly as a staging post of 30%. And quite clearly, we made a significant step in a biennial up year towards that goal in 2017. But what lies behind laying that statement is the kind of self-help operational improvement that was always a key part of the Events First strategy. And you may remember that when we launched it, we talked about 5 strategic priorities that are laid out across the top. And we have continued to work assiduously on programs in support of those priorities. By way of an example, our sales excellence program is rolling out a standard sales model, enabled by a standard sales force CRM solution, substantially complete in EMEA, well advanced in Asia and being rolled out in the Americas, as we speak. An exactly similar program on marketing excellence is now underway in EMEA, being piloted in Asia and later on the same will happen in the Americas during the course of this year. We approved a new technology model during the course of the year and the focus of that is to switch the level or proportion of spend away from what I call keeping the lights on, though I still want them to stay on, towards the customer and towards events. And towards the back end of '17, we announced our first outsourcing partnership with IBM, which is a move in that direction. Now as all those and many other initiatives are taking place, Marina and I are very conscious of how they affect the levers on margin improvement. So things like value-based pricing, part of our operational excellence initiatives, we continue to use that to have a positive impact on the margin. We've used event plans to really focus the business on the drop-through of organic growth to profit. And as you can see, that came through just under 47%, good drop-through. We're always conscious of the margin mix in the portfolio and procurement remains a very good contributor to improvement in the margin and that will continue into 2018. In doing all that, of course, we're conscious that we're spending money, we're making investment. This time last year, we increased that level of investment to GBP 40 million to GBP 45 million and we committed to deliver GBP 20 million per annum of savings, as we exited 2019. And as you can see as we exit 2017, we are well on our way to delivering against that commitment. So those 2 parallel things of reshaping and improving the quality of the portfolio, which is delivering growth and we've been sharpening the focus on performance, most clearly evident in the margin progression in the business. So where does that leave us? Well, I think undoubtedly, it demonstrates the value of the Events First strategy for shareholders. Certainly, I think that's been proven in the early part of 2018. But what sits at the core of that is the combination of choosing to focus on the very attractive Events industry and a large, high quality growth portfolio of events that are well-run. And that's what's contributed, I think, to a strong set of performances in 2017, a biennial up year. So when we think about 2018, a biennial down year, I can certainly say that we're carrying good momentum into 2018.

So with that, I'm going to open it up to questions. But I would, just before we do that, like to remind you what I said at the beginning. Marina and I have to be very careful about what we say in terms of forward-looking statements. I've got a couple of chaperones here who're going to try and keep us -- who are going to try and keep us safe. And you will have to forgive us, but we are going to err on the side of caution. So bearing all that in mind, please ask any question you want.

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Questions and Answers

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Nick Michael Edward Dempsey, Barclays Bank PLC, Research Division - Research Analyst [1]

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Nick Dempsey from Barclays. One question, please. So if we take the 5.3% adjusted underlying growth in Events in 2017, that's a bit boosted by extra launches than a normal year and it doesn't have any rationalization in it. And you said there will be some rationalization, but less than over the last 3 years? So if we adjust that to make it a true underlying number with some rationalization in it, is it more like 4 to 5?

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Tim R. Cobbold, UBM plc - CEO & Executive Director [2]

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Do you know sometimes, Nick, I'm accused of, you take out the bad stuff, it makes the number look good. And you're saying, if you take out the good stuff, it makes it look worse, right? I think, we've been quite clear that there's very strong performance on new launches. So I think the 1.5% contribution to the overall growth rate is stronger than you might normally expect. I think the thing I would have in my mind, what we have said is, we think we can get this portfolio over time to growing at the industry average on an underlying growth basis. And I think that the performance in '17 is a real good step in that direction. And that's -- rather than getting into the nuts and bolts of it because I might get into trouble, that's the direction that, I think, we are really headed.

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Nick Michael Edward Dempsey, Barclays Bank PLC, Research Division - Research Analyst [3]

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So just a quick follow-up. What do you define as the industry average because we get different numbers from different...

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Tim R. Cobbold, UBM plc - CEO & Executive Director [4]

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Well, I think it normally starts with a 4 (inaudible) but it depends how the industry evolves. Behind you.

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William Henry Packer, Exane BNP Paribas, Research Division - Executive Director of Media Equity Research [5]

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It's Will Packer from Exane BNP Paribas. Couple of questions for me, please. Firstly, in terms of Fashion, you've been pretty open about the performance and the various factors at play. Could you talk a little bit of the impact of that top line on the bottom line for Fashion. To what extent have you managed to use cost savings to protect profitability? And what's the sustainability of that looking forward with no improvement? And secondly, could you talk a bit more about the general sustainability of margins at the Events division? Very strong performance, is that something going forward that can be sustained? I realize it may be gray area.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [6]

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Maybe a bit gray I think. So let's just think about Fashion, pretty large part of the business. So I ought to be a little bit careful. So we'll talk about what I've said before, right. So what we said before is that we thought that in 2017, we'd actually take some cost actions to help support the margin. And what I've just told you is that we expect the decline to be pretty similar to what we saw during '17 and '18 and that we would be making investments despite the negative impact we had on margin. So if you can kind of join that up, you get a bit of an answer I think to your first question. And I think, in terms of your second question, which was about sustainability of margins, I think -- and this is a general comment, it's not an '18 or going forward comment. I think, we have demonstrated there is capacity for margins to expand. When we announced that medium-term goal last year, we said as a staging post. And whilst you have to be careful in comparison with our peers because of cost allocations, actually there are some higher margin numbers around in Events -- significantly higher margins around in Events and this probably tells you that there is good sustainability and direction to travel over the longer term. Am I right, boys?

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William Henry Packer, Exane BNP Paribas, Research Division - Executive Director of Media Equity Research [7]

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Just to come back on FY '17 Fashion. Did margin fall in 2017 of Fashion? Or did the cost savings offset the decline fully?

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Tim R. Cobbold, UBM plc - CEO & Executive Director [8]

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They were a little bit weaker, but fundamentally flat.

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Thomas A Singlehurst, Citigroup Inc, Research Division - Director and Head of European Media Research [9]

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It's Tom Singlehurst from Citigroup. When you were going through your presentation, you had -- you essentially made the point that small bolt-on deals bang on target and making good returns, and the bigger ones (inaudible) you slightly overestimated, if not the magnitude of cost savings, certainly, the sort of time frame for delivery.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [10]

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What we said -- just to be clear that what we said was, 1 or 2 revenue-based synergies, revenue-based synergies. Fundamentally, that deal was justified on revenue synergies unusually had slipped out of '17 into '18, but it's kind of think about it, that will just be caught up in '18.

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Thomas A Singlehurst, Citigroup Inc, Research Division - Director and Head of European Media Research [11]

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Well, that actually -- that largely answers what I was -- because I was worried that there might be some sort of institutional overconfidence on the cost savings opportunity within larger deals, but you reckoned -- understanding that...

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Tim R. Cobbold, UBM plc - CEO & Executive Director [12]

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We didn't buy Allworld for cost savings, we bought it because of some amazing complementarity between that business and our business in Asia. We were in 11 countries, they were in 9 of them. We were in 8 sectors, they were in 7 of them. That's why there's such a strong revenue synergy case.

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Marina M. Wyatt, UBM plc - CFO & Executive Director [13]

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I mean, actually our history on delivery of cost synergies on other deals is that we actually deliver or overdeliver on them as well. We don't underdeliver.

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Christopher Anton Giles Collett, Deutsche Bank AG, Research Division - Research Analyst [14]

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It's Chris Collett from Deutsche. Just couple of questions. One was, you highlighted the lower rate of growth from your smaller silver events. So just wondering, operationally, what can you do to try to lift that growth rate up? Second, I think, you gave contribution of Allworld to growth, but did you give the actual growth rate of Allworld?

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Tim R. Cobbold, UBM plc - CEO & Executive Director [15]

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I didn't.

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Christopher Anton Giles Collett, Deutsche Bank AG, Research Division - Research Analyst [16]

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You didn't, right? Would you like to give it to us?

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Tim R. Cobbold, UBM plc - CEO & Executive Director [17]

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(inaudible) was higher then it must be higher than the rest of the portfolio because it was additive. So I think that's your answer to that.

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Marina M. Wyatt, UBM plc - CFO & Executive Director [18]

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Yes, so it's higher than the 5.3% overall across the annual portfolio -- annual events portfolio.

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Christopher Anton Giles Collett, Deutsche Bank AG, Research Division - Research Analyst [19]

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Okay. And then one last question just -- maybe just to help us on modeling the biennials. Can you give us what the pro forma in a biennial year is including...

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Tim R. Cobbold, UBM plc - CEO & Executive Director [20]

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That one's difficult. So I'm going to let Marina answer that one. I don't know whether my slide helped at all.

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Marina M. Wyatt, UBM plc - CFO & Executive Director [21]

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I think -- yes, I think it's on that slide actually. Do you want to just go put it back up?

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Tim R. Cobbold, UBM plc - CEO & Executive Director [22]

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Let me just see if I can navigate back to this.

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Marina M. Wyatt, UBM plc - CFO & Executive Director [23]

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Yes.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [24]

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Does that now help you? Gives you a sense of it. Maybe we'll take it outside and then we can work out (inaudible)

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Marina M. Wyatt, UBM plc - CFO & Executive Director [25]

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If you look at the -- yes, no, I can answer that, but that's looking at the overall portfolio. You can see what appears in the odd years and what appears in the even years and the different margin profile of the odd year versus the even year.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [26]

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We can help you (inaudible).

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Marina M. Wyatt, UBM plc - CFO & Executive Director [27]

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Yes.

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Tim R. Cobbold, UBM plc - CEO & Executive Director [28]

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What was your first question, did we answer that or not?

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Christopher Anton Giles Collett, Deutsche Bank AG, Research Division - Research Analyst [29]

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On the silver...

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Tim R. Cobbold, UBM plc - CEO & Executive Director [30]

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Right. I mean, interestingly, we're going to do the job on silver. So I put it this way, that we did on gold events during the course of 2016 and of course, inevitably, there are a lot of events in there, a whole range of things that we can do. So I'd be hopeful that you would see that improve during the course of '18.

Any other questions? Excellent. Quite good being an offer period. All right. Well, thank you, both -- thank you all very much for coming, both you who are in the room and on the Internet. Thank you all very much.