Q4 2020 S&P Global Inc Earnings Call
Good morning, and welcome to the S&P Global's fourth quarter and for 2020 earnings Conference call.
I'd like to inform you that this call is being recorded for broadcast all participants are in a listen only mode.
We will open the conference for questions and answers after the presentation and instructions will follow at that time.
To access the webcast and slides go to Investor Day SP Global Dot Com, if you need any additional technical assistance. Please press star zero and I will assist you momentarily.
And now I'd like to introduce Mr. Chip Merritt Senior Vice President of Investor Relations for S&P Global Sir you may begin.
Thank you for joining today's SP global fourth quarter and full year 2020 earnings call presenting on today's call are Doug Peterson, President and CEO and he bought Steenbergen Executive Vice President and Chief Commercial Officer.
We issued a news release without results earlier today, if you need a copy of the release.
Schedules, they can be downloaded at Investor day SP Global Dot com.
Before we begin I need to provide certain cautionary remarks about forward looking statements except for historical information. The matters discussed on the teleconference may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including projections estimates and descriptions of the future events.
Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated and these forward looking statements.
And in this regard we direct listeners to the cautionary statements contained in our form 10, Ks 10, Qs and other periodic reports filed with the U S Securities and Exchange Commission.
In addition, as announced on November 30th S&P Global and I just market entered into a definitive merger agreement. This call will touch on the transaction.
Please note this call does not constitute an offer to sell or buy all of the solicitation of any offer to buy or sell any securities nor shall there be any sale of securities and any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or qualification under the securities law.
All of any such jurisdiction.
No offering of securities shall be made except by means of the prospectus meeting the requirements of section 10 of the Securities Act of Bank of <unk> 33.
In connection with the proposed transaction S&P global and I, just market and have filed a registration statement on form S. Four with the SEC, which will include a joint proxy statement and the prospectus.
For the global and IHS market will file of other documents regarding the proposed transaction with the SEC.
Before making any voting or investment decisions investors and security holders all of that said the global or IHS market stock are encouraged of carefully read this entire registration statement and proxy statement prospectus, which is available on our website and SEC Gov.
And today's earnings release and during the conference call will provide of adjusted financial information.
This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's the.
The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U S. GAAP.
This call of <unk>.
And the discussion of our outlook.
And statements about expected future events that are forward looking and are subject to risks and uncertainties and factors that could cause actual results to differ materially from expectations can be found on our filings with the SEC and on our website.
I would also like to call your attention to the European regulation and.
Any investor who has or expects to obtain ownership of 5% of more of S&P Global should give me a call to better understand the impact of this legislation on the investor and the essentially the company.
We're aware of do we do have some media representatives with us on the call. However, this call is intended for investors and we would ask the questions from the media be directly to Dave Guarino of 212 for 381 and $4 71.
At this time I would like to turn the call over to Doug Peterson Doug.
Thank you chip welcome to all of you joining today's earnings call the for.
First thing I'd like to do is thank our people at S&P global for their dedication and commitment throughout 2020 as the pandemic continues to take its toll across the globe. Our people remain focused on supporting each other our customers and our communities together the continued to provide relevant and timely benchmarks data and research to help our clients navigate through this.
And the economy, so to all of 23000 of you let me say thank you.
Now, let me turn to the key financial achievements in 2020.
And peak global delivered 10% organic revenue growth and 23% adjusted diluted earnings per share growth. All four businesses contributed with the growth in both revenue and adjusted operating profit, we generated $3 $3 billion of free cash flow, excluding certain items and returned $1 8 billion through share repurchases and dividends.
In addition to the very strong financial results, we made significant progress on our key initiatives as well the.
The expertise and technology that we've developed over a number of years enabled the creation of new products and product enhancements and productivity improvements.
Funding growth investments to leverage our technology, we were able to deliver the largest collection of new product launches I can remember.
We also continued to expand our ESG and climate product offerings, including the new S&P Global ESG scores I'll share more about all of these new products and a moment.
Another highlight was the completion of our Investor day productivity target as we surpassed the target and achieved $120 million of annual savings.
Upon completion, we then initiated the new $120 million program in October which is targeted to be completed and two to three years.
There are two common questions that investors have been asking for years well we of results look like in the recession and you really have any more opportunities to improve margins I think 'twenty and 'twenty went a long way of answering both of those questions.
To recap the financial results for the full year organic revenue increased 10% to seven 4 billion.
Our adjusted operating profit increased 18%, our adjusted operating profit margin increased 310 basis points to 53, 3%.
In addition shares outstanding decreased 2% over the past year contributing to the 23% increase and adjusted diluted EPS.
Hey, Bob will review, our fourth quarter financial performance at the moment.
I am, particularly pleased that all four businesses contributed to the company's overall revenue growth and adjusted operating profit improvement waiting for led the way with organic revenue up 15% and its adjusted operating profit margin of 460 basis points to 62, 4%.
The only business for the decline in the adjusted operating profit margin was the S&P Dow Jones indices at 69, 1%. This was primarily due to higher legal expenses ESG expansion and incentives.
It is important to remember that our 2020 financial results are part of the solid track record of performance over the past for years, we've posted a compound annual growth rate of 7% for revenue and we have averaged more than 250 basis points per year of adjusted operating profit margin expansion.
And this has resulted in more than doubling of our adjusted diluted EPS over that timeframe.
We also made large strides and non financial metrics and 2020 by enhancing the company's environmental performance and improving our social outreach.
We issued our second annual PCF Day report, featuring 2019 carpet and adjusted EPS.
We secured approval from the science based target initiative for a new target to reduce absolute scope, one and two greenhouse gas emissions, 25% by 2025. This is from the 2019 base. We are targeting to achieve net zero by 2040, we supported work from home arrangements with flexibility for those time.
Martini asleep caring for children or elderly family.
We enhanced benefits for sick leave global care leaf and days of off for voluntary efforts and wellness.
And the contributions by the S&P Global Foundation increased 170% to $11 million.
These donations to support COVID-19 relief racial equity social Justice economic conclusion, environmental sustainability and gender equality.
We've also made substantial progress on our external ESG initiatives ESG revenue reached $65 million and 2020 of 40% increase over 2019 the.
The new product launches and ratings are all gaining momentum with the number of ESG evaluations Green evaluations and Sam benchmark shown here. We also saw an increase of 220 companies completing the corporate sustainability assessment of these assessments are integral to much of our ESG effort.
And intelligence launched numerous products, including S&P global ESG scores, covering 7300 companies and true cost of climate analytics and environmental data to contain the environmental data on 15000 companies. These are both available on the market intelligence platform or is the data feed.
And indices ESG exchange traded funds assets under management increased by more than 200% of $20 billion and the year was filled with new ESG indices being introduced and our customers, creating new Etfs and options and.
And platts the energy transition is becoming increasingly important we continue to support the markets with new price assessments for commodities like battery metals and hydrogen.
Last year, we told you about the shipping industry moving to low sulfur fuel and our launch of new low sulfur marine fuel price assessments. There are now a range of related future contracts based on our prices with open interest growing steadily.
We also continued to advance our China initiatives in 2020, we introduced Mandarin language versions of both trading 360, and the market intelligence platform. We released the beta version of the China credit analytics platform. This is an integrated desktop solution that generates credit insights on public and private companies using unique content.
And the localized analytics are aligned with the S&P global standards.
We completed nine public ratings and the fourth quarter, including the first non bank corporate rating, bringing the 2020 total to 22 ratings, we completed our registration, enabling ratings and the exchange bond market, which accounts for approximately 40% of the total number of bond issuance and China.
And it's also encouraging that the Chinese bond market continues to develop we continue to see positive signs from the Chinese regulators, who are driving change and the local credit ratings market.
In addition, following several recent high profile default, there is and increased sensitivity and awareness among local market participants to the quality of credit ratings.
Internally 2020 has been double of the year of new product launches I can't remember a year with so many launches. This is a direct result of the increase in investment spending over the past two years combined with our exceptional technology expertise.
The launches included marketplace, the snowflake partnership risk H pro spread and the Platts platform all of which we have discussed on previous earnings calls.
There are two new items, we haven't discussed yet the first is the launch of S&P risk casting indices, which use artificial intelligence to adjust the weighting of equity and fixed income positions and response to market signals.
The second is the S&P can show Moon shots index, which measures the companys propensity to innovate the index excludes the Mega cap technology names instead, focusing on the next generation of innovative companies.
In addition ratings of $3 60 launched comprehensive data models and tools for the CLO user base and enhanced content for international and U S public finance.
While we included the S&P cancer Moonshot index on the last slide we needed a separate slide to cover all of the new products product enhancements and productivity improvements can show developed in 2020.
These include omni search on the market intelligence platform high speed revamp of the platts market on close process utilizing AI publication times for assessments reduced by an average of 80%. We've converted 66 markets to the can show MLC process already and will continue to migrate additional markets and 2021.
Potential extract which enables the information to be replicated exactly is found and the original document can chose the indices of also made great progress with the Spider S&P can show new economies composite EPS ending 2020 of its over two $3 billion and AUM.
And a 10 fold increase this year and.
And we've made several attention solutions available on our recently launched marketplace. The first is can show scribed, a tool and enabled us to create 36000 transcripts last year, while expanding our corporate coverage by 1500 companies.
This tool is now available for our clients to convert speech to text. The second is cancel inc. A tool of and enabled us to add datasets on 11 million of entities from credit safe frequent and IP query.
Tool is also available to our clients to help link datasets.
Taken together cognitive automation from potential Inc. Can show scribe and several other machine learning tools of delivered an estimated 700000 hours of savings while we have developed exceptional technology capabilities. Among our community. We've also made great strides to expand technological skills of all employees a great example.
Is robotic process automation or RPE employees from around the company of embraced RPE taken internal classes and created their own bots generating an estimated savings of 300000 hours in 2020.
While all of the work that we do internally is what drives much of our success key industry trends also help the.
And the shift into passive investing continues this chart shows the cumulative U S equity flows of $1 eight trillion and the past 10 years and we of prime beneficiary of this trend if.
If we look at ETF AUM associated with our indices, there has been and almost 150% increase over the past five years to two trillion.
Over the long run we believe this trend will continue.
The increase and global issuance has been another positive trend for the company, while 2020 issuance and aggregate increased 13% as is often the case there were pockets of strength and pockets of weakness.
Global investment grade and high yield were the strongest categories, increasing 26% and 27% respectively. This was due to incredible activity and the U S, which increased 53% and 66% respectively.
Meanwhile, both structured and leveraged loans lagged and 2020 the.
The market clearly favored high yield issuance over leveraged loans and 2020, besides of the decline and leveraged loan issuance and the U S and Europe. This slide depicts the percentage of loans that we weighted which was 91% and both the U S and Europe.
I would now like to ship the presentation to our outlook for 2021.
Let's start with the latest view from our economists therefore casting global GDP growth of 5% and 2021 with growth accelerating during the year as vaccinations proceed and Lockdowns recede.
And they believe fiscal and monetary policy will remain very accommodated and flexible while the correlation between GDP initiatives for severed by the pandemic, we expect the long term correlation to remain intact.
The latest global refinancing study was issued earlier this week the total amount of global debt maturing. This study is $11 three trillion dollars over the next five years. This is up 5% from the 10 eight trillion highlighted in last year's study.
The chart on the right depicts the global high yield debt maturing over the next five years. It told us to three trillion of 20% from $2 five trillion and last year's study this bodes well for future of high yield issuance.
After issuance growth of 15% and 2019, and 17% and 2020, our ratings research group anticipates, the issuance will decreased 3% and 2021 the.
<unk> forecast calls for gains and financials and structured of 4% and 3%, respectively and decreases in non financials and U S municipal issuance of 9% and 5% respectively.
Please note that this is an issuance forecast not a revenue forecast.
Despite the forecasted decline supporting factors and 2021 include favorable financing conditions, increasing amounts of sovereign debt with negative yields and renewed M&A pipeline for corporations.
On this slide I want to share some of the key initiatives that we're focused on in 2021 Asia and China in particular continue to be attractive markets for new product development and expanded capabilities. We want to continue to provide customers with new offerings, including the S&P global platform additional industry solutions expanded <unk>.
<unk> products and broadening ratings of 360 coverage to additional issue of categories.
We also want to focus on innovation and technology, we will do this by bolstering our data and systems capabilities to support growth, while leveraging technology for new products and improved customer experiences.
And we will continue to enhance our data extraction and ingestion capabilities.
We're especially pleased to integrate our company wide ESG offerings, creating new ESG products and extending our existing ESG coverage universe.
The most important initiative of the year will be our upcoming merger with IHS market. This is an incredibly transformative opportunity for our company and our customers the.
The combination of S&P global and IHS market creates a strong company and will have increased scale and world class products across numerous core markets with the track record of deploying cutting edge technology to accelerate our powering the market for the future strategy the.
Pro forma company will serve of global customer base across the financial information and services ratings indices commodities and energy and transportation and engineering together, we will offer differentiated data analytics and research and benchmark is important to the workflows of many of the world's leading companies and governments, we expect the combine.
Company to deliver EBIT <unk> synergies of approximately $680 million, resulting in a highly profitable combined company with continued opportunity for margin expansion.
The acquisition is expected to generate the return on invested capital in excess of our weighted cost of capital after full synergy realization and consistent with our M&A philosophy.
For the employees of both companies, we will combine to best in class Workforces and deep expertise and complementary cultures focused on serving the global needs of our customers.
I'm incredibly proud of the team we build of S&P global and we look forward to welcoming the talented IHS market employees to S&P global.
There are three parallel paths that are underway to close the transaction of and prepare for the combination. The first the shareholder approval. The form S. Four was filed and became effective last month. This enabled us to establish record dates and schedule shareholder meetings.
The shareholder meetings are scheduled for March 11, the second is regulatory approval, we are working toward regulatory approval and the countries listed we continue to expect closing in the second half of 2021.
The third is pre close integration planning, we have created integration teams focused on day. One readiness. These teams are developing plans to focus on organizational integration real estate consolidation technology scale and efficiency cross selling and new product development and we've created a value capture work stream similar.
What we established on our SNL acquisition to pursue and tracked synergies.
The new company will have six businesses Martina Cheung will lead ratings Martina will also be responsible for leading ESG across the company Adam cancer will lead market intelligence and financial services. So <unk> will lead Platts and resources, Dan Draper will lead the indices Edward cover and Yea will lead transportation.
In addition to being CFO of <unk> Steenbergen will lead consolidated market and solutions and after the merger's close John Berisford will lead all of our integration efforts together with Eva out I'm optimistic that S&P global has a great futures of Standalone company with exceptional assets technology and people <unk>.
<unk> our company with IHS market makes for an even brighter future and now I'd like to turn the call over to <unk> Steenbergen, who is going to provide additional insights into our financial performance and outlook.
And <unk>.
Thank you Doug and welcome to all of you on the call. Let me start with our fourth quarter financial results organic revenue increased 6% adjusted corporate unallocated expense decreased 21%, primarily due to the timing of charitable contributions and lower professional fees and a reduction in the companies.
The real estate footprint adjusted total expenses increased 11% and I'll come back to this on the next slide adjusted operating profit margin decreased 150 basis points due to the increase and total expenses. The decrease in the effective tax rate was primarily due to the successful resolution.
All of various tax audits and a true up of prior year periods of Texas average diluted shares outstanding declined 2% and adjusted diluted EPS increased 7%.
While total adjusted expenses for the full year increased 4% for the fourth quarter day increased 11%. This was primarily due to increased incentives as a result of strong 2020 financial performance expenses related to the acquisitions of Greenwich Associates by Crystal and the <unk>.
Sam ESG data and analytics platform, and the investments and growth initiatives and productivity programs.
The non-GAAP adjustments this quarter collectively generated a net pre tax loss of $247 million. They included $138 million associated with office lease equipment and software impairments $55 million and the restructuring across the company $24 million and IHS Mark.
<unk> merger costs $2 million for potential retention related expenses and $29 million and deal related amortization, the termination of office and equipment leases and the restructuring actions will result in annual savings of approximately $70 million approximately 20 million of the savings.
As a part of the new $120 million productivity program. The balance is related to separate the business efficiency initiatives.
This quarter all for deficient delivered increased revenue with indices, achieving double digit growth as I explained earlier due to increased cost adjusted operating profit margins were generally muted.
For the full year of ratings and Platts delivered superior adjusted operating profit margin improvement market intelligence increased slightly with elevated investment spending and indices decreased slightly primarily due to higher legal expenses and ESG investments.
Each year on our fourth quarter earnings call, we share changes and our head count in 2020 head count increased 2%. This year, we separated enterprise technology head count from corporate head Count corporate Washington area with the largest head count increase at 16%. This was the result of in sourcing.
About 130 order to cash positions, resulting in annual savings of several million dollars the.
All of the other areas that had an outsized increase was platts, which increased headcount of 5%. This was due to investment spending to expand their commercial presence in Asia and fund their benchmark acceleration program as well as in sourcing of contractors.
Last year, we share to dislike and estimated that we would invest $150 million and growth initiatives in 2020, the projects that make up the disposal are listed on the left we ended up spending $139 million, which will still an exceptional level of activity for the company for 2021, we expect the.
Investment spending to moderate to $100 million.
This activity coupled with the merger with IHS market should keep the organization fully engaged with exciting new projects and opportunities.
On our third quarter earnings call, we introduced a new $120 million productivity program to be completed over the next two to three years I am pleased to report that we're off to a fast charge of $49 million of run rate savings already achieved the.
These were mainly from reduced real estate and changes to contracts as well as investments made to permanently reduce G&A. The run rate savings do not include the $20 million benefit from the impairments and restructuring actions taken at the end of 2020.
Now turning to the balance sheet, our balance sheet has low leverage and surplus liquidity, we have cash and cash equivalents of $4 1 billion the.
This is temporarily higher than necessary and will be reduced when we resumed share repurchases debt of $4 1 billion.
And undrawn revolver capacity of $1 $2 billion and no commercial paper outstanding our adjusted gross debt to adjusted EBITDA is consistent with our current leverage targets.
Free cash flow, excluding certain items reached $3 $3 billion, and 2020 and increase of $714 million or 28% over the prior year periods in 2020, the company returned $1 2 billion.
The repurchase of 4 million shares and paid dividends of $645 million and aggregates. We returned 55% of free cash flow excluding certain items. This fall short of our target of 75% as we head to curtail share repurchases due to the merger.
The inflation open window, and we have an opportunity and we'll repurchase shares before the merger closes if not we anticipate resuming share repurchases. After the merger is completed.
Now, let's turn to the deficient and results starting with S&P Dow Jones indices for the segment delivered 10% revenue growth primarily due to gains in AUM linked to our indices and data subscriptions in the fourth quarter, we reported an 8% increase and adjusted expenses, primarily due to incentive compensation true.
<unk> increased head count and application development spending and 11% increase and adjusted segment operating profit and adjusted segment operating profit margin of 68, 5% and increase of 50 basis points on the trailing four quarter basis. The adjusted segment operating profit margin.
Decreased 40 basis points to 69, 1%.
S&P Dow Jones indices delivered growth across all revenue channel this quarter and sampling fees increased 12% with gains in Etfs and mutual funds exchange traded derivative revenue increased 3% data and custom subscriptions increased 7% due to an increase in end of day ACC.
Activity at the CBOE decreased in the fourth quarter with S&P 500 index options activity, decreasing 13% and fixed futures and options activity decreasing 1%. This was in contrast to increased activity at the CME, where the equity complex volume increased 58%.
Almost all of the gain at the CME was due to the successful launch of the micro E. Mini S&P 500 futures, excluding gift product the volumes at the CME equity complex were essentially flat.
The market intelligence delivered organic revenue growth of 7% with strength in both renewals and new business usage of our key market platforms increased 13% year over year adjusted expenses increased 10% due to incentive compensation true ups and higher commissions and royalties.
Adjusted segment operating profit increased 2% and the adjusted segment operating profit margin decreased 160 basis points to 37% on a trailing four quarter basis. Adjusted segment operating profit margin increased 30 basis points to $32 four per se.
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Looking across the market intelligence components desktop revenue grew 5%, excluding acquisitions and divestments during 2020 market intelligence delivered significant enhancements to the platform. These included improved Fisher <unk> of customizable dashboard integration of cancer.
So omni search and upgraded mobile experience and the cloud based infrastructure for better performance. These enhancements help us meet the needs of many platform users and position us well for continued execution against our integrated desktop roadmap and data management solutions revenue grew 10%.
And credit risk solutions revenue grew 8%.
Ratings reported revenue increased 7% organic revenue increased 5%, excluding the acquisitions of the <unk> data and analytics platform for <unk> and crystals acquisition of Greenwich Associates adjusted expenses increased 17% primarily due to.
And of true ups and acquisitions. This first of all of it and a 1% increase and adjusted segment operating profit and a 370 basis points decrease and adjusted segment operating profit margin on the trailing four quarter basis adjusted segment operating profit margin increased 460 basis points.
262, 4% non.
Non transaction revenue increased 15% organic non transaction revenue increased 11%, primarily due to fees associated with surveillance frequent issuer programs rating evaluation service on increased M&A activity and high and new entity credit ratings activity transaction revenue.
It was relatively flat as increases and bank loan ratings revenue were offset by a decrease and bond issuance compared to a very strong fourth quarter of 2019 and should we have seen time and time again, the various parts of the ratings business often move in opposite directions, with some up and some down and.
Any given quarter or year this quarter non transaction revenue was strong while transaction revenue was unchanged.
Non transaction revenue is generally a steady source of growth but of broke out to the upside in the fourth quarter about one third of the organic growth in the fourth quarter was from surveillance fees and frequent issuer programs that are more recurring in nature about one third was from large jumps and rds.
And new entity credit ratings, which we expect to continue to be strong and 2021 and about one third was from other items.
This slide depicts ratings revenue bites and markets the largest contributor to the increase and ratings revenue was an 8% increase in corporates. In addition financial services revenue increased 6% structured finance decreased 6% governments decreased 3% and the.
Crystal and other category increased 8% on the right side of the slide you can see the changes and revenue within structured products. The largest change was and see MBS, which was due to a 64% decrease and global sea MBS issuance.
And now turning to Platts reported revenue increased 5% with core subscriptions, increasing 6% and global trading services decreasing 5% GTS revenue decreased mainly due to lower natural gas and iron ore volumes, partially offset by increased LNG volumes also.
Due to Covid our conference business revenue was down about one $5 million in the quarter adjusted expenses increased 7% due to incentive true ups and growth investments adjusted segment operating profit margin decreased 100 basis points to 51, 7% the trailing.
And for quarter adjusted segment operating profit margin increased 200 of 30 basis points to 54, 7%.
The fastest growing categories during the quarter were petrochemicals up 18% and power and gas up 6% petrochemicals had a favorable comparison two of weak fourth quarter of 2019.
We recently filed the S. Four and received a handful of questions about the document they were generally related to the two topics on this slide. The first question was if the 2021 standalone adjusted diluted EPS and the etch for what our guidance, it's not the $12 and 36 figure.
In the S. Four assumes that we will continue to repurchase shares and 2021 assistant the loan company. However, as we have stated we think that it is unlikely we will resume share repurchases before the merger with IHS market closest therefore, our 2021 and guidance assumes no share repurchases.
The second difference is that the S. Four figures were based on our October internal forecast. Our initial 2020 on guidance is based on our most recent internal forecast, which has improved outlook, primarily due to increased growth and ACC and our subscription businesses and the AUM and our indices business.
The second question was why the cash flow figures index for differ from the figure stated on the merger conference goal and our normal free cash flow reporting. These are two different views of free cash flow. The S. Four per fights and unlevered free cash flow forecast typically utilized to value companies by a discounted cash flow analysis.
The difference between the Unlevered free cash flow and the export and the free cash flow and our guidance and discussed on our merger call is that the etch for definition includes stock based compensation expenses and acquisitions and excludes interest payments.
We're not providing 2021, the GAAP guidance, because given the inherent uncertainty around the merger management cannot reliably predict all of the necessary components of GAAP measures.
And dislike depicts our adjusted guidance, while we expect the depth and merger will occur and the second half of this year, we are providing adjusted guidance on the stand alone basis revenue, increasing mid single digits corporate and allocated expense in the range of $140 million to $150 million.
And increase over the $128 million and 2020 due to some expected normalization of pandemic related cost savings and deal related amortization of $95 million to $100 million a decrease from the $123 million in 2020 of certain assets have been fully amortize.
Yeah.
Operating profit margin in the range of 53, 8% to 54, 3%, which is 50 to 100 basis points higher than in 2020.
Interest expense net which includes both interest income and the interest expense in the range of $120 million to $125 million. This is lower than the $141 million and 2020 due to the recent refinancing of a large portion of our outstanding debt.
Tax rate and the range of 21, 5% and 22, 5%, which is consistent with the 'twenty, one and a 5% reported in 2020.
Diluted EPS and a range of $12 and 25 to $12 and 45.
A 5% to 7% increase over 2020, while this growth rate might see modest it is 29% to 31% higher than our 2019 EPS. That's an average of about 15% per year, we just happen to achieve most of this increase and 2020 also keep in mind.
These figures assume no share repurchases in 2021, and finally free cash flow generation and a range of three three and $3 $4 billion, which is flat to up $100 million compared to 2020 due to improved business performance, partially offset by normalize.
And cash collections following a strong year with record low delinquencies and 2020.
In addition to the slides that we have refute on this goal there isn't the appendix with additional fourth quarter slides that can be downloaded from the investor presentation section of the Investor Relations website and conclusion 2020 lots of very strong year for S&P global despite the recession all of our businesses.
Grew revenue and we improved our adjusted operating margin of 310 basis points year. After year, we have demonstrated our ability to grow revenue and adjusted operating margin and we don't believe that we are close to being done and we remain encouraged about our future and have just introduced 2020.
One adjusted guidance that reflects our optimism for <unk>.
Finally, I want to Echo <unk> comments about our employees the continued to perform at an exceptional level and difficult circumstances, and Doug and myself and the rest of the leadership team of blood.
The third 10, S&P and Innovativeness and with that let me turn the call back over to chip for your questions.
Thank you just a couple of instructions for our phone participants do indicate that you wish to ask the question. Please press star one and record your name the cancel or withdraw your question simply press Star two.
Please note we sold the two questions in order to allow time for other callers during today's Q&A session.
And if you've been listening through the speaker phone, but would now like to ask the question. We ask that you lift your handset prior to pressing star one and remain on the handset until your question has been answered this will ensure better sound quality.
Greater we will now take the first question.
Thank you. Our first question comes from Toni Kaplan from Morgan Stanley You May ask your question.
Okay.
The only you might be on mute.
Toni Your line is open.
Announcement as buying IHS market, what's been the reaction from your largest customers and from your internal business unit.
And in particular that they're excited about or Conversely, concerned about that maybe you weren't expecting initially.
Toni Hi, This is Doug let me, let me take that well first of all thank you for joining the call today and since we announced the merger with IHS market. It's been great excitement from our customers. We have heard in particular from the financial institutions about all of the capabilities and we're gonna be bringing together from the energy industry. We've also.
And a lot of excitement for the people that are interested in ESG and our employees are also very excited about that we know each other we had worked together before between the our index business their fixed income Index index business and our index business. The people know each other there we've had great respect for Lance and for the team at IHS market.
And so there is excitement across the board and we see things are very positive one final comment as you saw in the slide we talked about parallel paths. One of those is integration planning. So our teams have started to get to know each other through the integration work that we're planning for and again there. There's a lot of respect for each of the teams.
And a lot of progress being made there.
Great and I wanted to ask the that the market intelligence strategy going forward the history.
Directly you've been positioned as the level of price competitor of relative to peers and with all of the assets that you've purchased over the years and with the eventual integration of IHS as data does your strategy change going forward would you expect to be at a higher price level or actually expecting of growth to be market driven.
And by adding our customers or maybe it's ballast and just how do we think of that the strategy there.
Yes. This is really a little bit premature for me to be giving you the strategy, but if you think about what we're going to be bringing together market intelligence right. Now has a really strong base of installed customers.
Hundreds of thousands of users that are already using our information. So you think about that as one distribution channel for all of the very rich IHS market data on the other hand IHS market also has very powerful tools, which include workflow.
For financial institutions and for corporates and.
The asset management industry et cetera, so getting those two together is going to allow us to have a much more much more comprehensive strategy. Both looking at the value that we bring which you talk about is our price strategy, but I think of more of a value strategy that expense that and then also ability to bring much more many more products and service.
<unk> to all of the different kinds of customers that we serve.
Thanks, a lot.
Thank you.
Thank you. Our next question comes from Alex Kramm with UBS you May ask your question.
Yeah, Hey, good morning.
Just go into the base business for a minute here on on the rating side I think you made the comments Doug that the 3% issuance forecast, we should not take that as an indication of revenue. So can you just flesh out the the other pieces, we should be thinking about I mean, clearly there's going to be a much different mix. This year, you obviously have some some pricing.
Opportunities and and and and then clearly the recurring revenues have been running along very nicely and maybe you can talk about that.
And the inability of dose so any anything that can help us bridge that gap to Oh, we should be thinking about the revenue there.
Yes. Good morning, Alex. This is said this is the <unk> as we have said many many times about the ratings business doesn't always reign everywhere at the same time. So there are always components out of growing up and several other components that are going down but in aggregate the outlook for ratings luxe always quite constructive for 2020.
The one overall from a revenue perspective, we expect low to mid single digit growth for ratings and that is particularly helped by non transaction revenue non transaction revenue. We're currently estimating to grow at the mid to high single digit level and 2021 that is being helped.
By higher surveillance fees based on more bonds outstanding based on the issuance levels last year and frequent issuer programs raising evaluation surfaces, which we expect to continue to be helped by the M&A environment and then add in terms of of mix. There's always some elements that are going up and down.
And then in addition to that we should also see some benefits for new products. So overall I think of very constructive for outlook for ratings and again overall from a revenue perspective for the full year low to mid single digit revenue growth.
Excellent. Thank you and then secondarily a eval.
<unk> you made this comment briefly that are in terms of share repurchases you could be doing something before the deal closes if there wasn't the open window. So maybe just flush out what and open window of means and then related to that what are your minimum cash requirements and.
On a standalone and combined company. So we can dimensionalize that a little bit here. Thanks.
Yes, Alex we would love to do share buybacks, but there are certain regulatory limitations that we are facing this year I think for for example, about the current periods right of shareholders vote is underway. So we would not be able to do share buybacks until the shareholders' meeting on March the 11th of course.
We have also closed windows with respect to our quarterly results and then we should not be in possession of material nonpublic information. So a combination of those elements might make the windows that we can do buybacks quite limited and therefore, we think it is unlikely we can do buybacks, but if there is an opportunity and from a legal perspective.
<unk>, we should be clear, we definitely would like to to restart some of the buybacks. Although ice we will do that post close of the merger, there's definitely going to be at that point in time zone catch up buybacks because of course, we're falling short towards our return targets at this point and time and then as we have stated at the merger of coal.
In terms of our new financial targets, we're expecting to return at least 85% of free cash flow going forward for the combined company and the combined company from a free cash flow perspective should have a very strong profile at north of $4 billion out of the gates in terms of free cash flow and growing to about 5 billion on north of $5 billion.
And a few years time from a balance sheet perspective, we will have a very robust balance sheet in the future where the leverage ratio and a range of two to two 5% and of course, we will have some minimum cash but absolutely. We are currently excess cash surplus cash that we will return to shareholders. Once we have the opportunity to.
So.
Fantastic. Thank you.
Thanks, Alex.
Thank you. Our next question comes from Ashish <unk> from Deutsche Bank, You May ask your question.
Thanks for taking my question. So just on I think you've come and sit on integration planning activities, obviously, you've given a pretty robust cost synergy targets.
As part of the most of it but are there areas that you've identified that could be potential incremental opportunities as you go through this integration planning.
And.
And at this moment the expense synergies of $480 million is still our best estimate at this point and time.
Please keep in mind, we're still in of planning phase and both companies are run separately and independently you know us as management as you know our management's philosophy and approach we will always look for further opportunities, but the $480 million of expense synergies is the number we are committed to right now.
And that's very helpful. And then maybe just a quick follow up the audio question Toni.
Toni asked John.
Just around the data as well as the cantos data science.
And I was wondering how do you think about opportunities to Florida and and.
And the data and meet that I just market has the combining the data and its MBS, but more importantly, applying can choose the designs on top of it.
Wondering if you could shed any incremental thoughts on the upfront.
Yes, and thank you Ashish and welcome to the calls and I think this is the first time, we've heard you on the call I will first of all of this is one of the areas that we've got a lot of excitement about it. If you think about what it's like to have the amount of data across both companies and and you see the success, we've had with <unk> over the last few years today, we we highlighted many of the new areas that they've been of.
Providing a great great success, when we think about the data that IHS market brings just as an example, there's 50000 customers and 140 countries, they're serving 80% of the global Fortune 594 of the largest companies and the U S. And then on top of that with the pricing data of the reference data the private market.
Aleutians, the fixed income benchmarks and indices and then all of that put together in a comprehensive data strategy with the data Lake that's going to give us and ability to take the can show capabilities and develop all types of new products and services. If you think about that though in addition, IHS market also brings its own high <unk>.
Quality data sciences teams and across S&P Global we also have other of high quality of data Sciences team. So this is one of the areas of the merger that we're most excited about and we've got teams that are already started looking at what some of those possibilities are.
Thanks, Doug that was really helpful color. Thank.
Thank you.
Thank you. Our next question comes from Andrew Nicholas.
From William Blair You May ask your question.
Hi, good morning.
Just wanted to ask and maybe a bigger picture question.
And I was wondering how you as the management team manage the different investment opportunities growth initiatives hiring plans for the Standalone business with such a major merger.
And to close later in the year or are you a bit more hesitant to commit to multiyear projects.
And so the the standalone business, knowing that there could be higher by opportunity the present themselves and the combined entity or do you just kind of keep your head down and run the existing business and address those opportunities when the time comes on.
Just curious any any insight on how you plan and manage that and the the waiting period would be helpful.
Andrew This is Doug I'm going to start and then hand, it off to eat out when we've been as you've seen earlier, we spent $139 million last year on a budget of $150 million of of target and this year, we've targeted of $100 million for our incremental growth expenses, we have of process around that I'm going to hand that off to Eva to talk more about that.
But what's important for US is that we are managing the company for the long run we think that there are opportunities for us to continue to grow and the ratings business and platts and market intelligence and indices very specifically with the capabilities that we have today expanding into new markets like we've mentioned Asia or China, new product capabilities.
Or customer experience that we think are very important to continue with our differentiation that drives our growth. So we're committed to all of those organic investments that we see internally and to keep driving those but as I. Just mentioned there's also so many possibilities of bringing the two companies together, it's too early for us to plan those as Eva.
Mentioned, we're two separate companies were managed separately, but we can start dimension of nodes and working together to identify what those could be that's one of the reasons. We pulled back the investment for 150 to 100. This year, because we didn't want to overextend people on the areas that they might not be able to deliver once we started focusing on the <unk>.
Gration Eva to on and talk a little bit more about our investment planning.
And Andrew the way how we operate here is we have a committee and investment Committee.
It is bill.
Buildup by the business presidents and myself and we're looking at all of the growth initiatives that are being put forward. These are initiatives that should drive revenue growth going forward and should have a minimum level of investments because we don't want to look at the all the small investments. So this should be larger growth initiatives.
And the initiatives for the company that should help with revenue growth in the future and we make selections which of those are the most interesting where we would allocate our resources. It's not the only financial resources more often of course product development resources technology resources might be limiting factor for they are as well and then ultimately we.
Allocate funding to dose initiatives and we are very encouraged about the growth of dose of initiatives as Doug has mentioned during the prepared remarks, we have seen a lot of product launches in 2020, we're seeing good traction of those initiatives. So we're very encouraged at the level of innovation and new business development that we're having within the company.
And we're continuing with that as well and 2021. Please keep in mind that although the overall investment number is dropping and it doesn't mean that those costs are going away because after two years when and the initiative is funded for a period of two years. It goes to a business as usual situation and of course will become part of the <unk>.
Normal business as usual, but yet of the deficient and so it is not really a total expense dropped but the investments the new investments in the first two years is going to be about 100.002 million 21 sales still I think of very good number of strong number and all of these initiatives from our per step perspective and make sense.
Independently of the merger of because they all are good initiatives that will help all of the combined company into future.
Great. Thank you that's helpful and then and my follow up.
And the index business I know, you're still of six nine months away for them from closing, but I am curious if you of any initial thoughts on kind of the strategy or change and kind of distribution approach that.
And that might be required as you kind of focus on building out fixed income and multi asset ETF product I'm, just trying to figure out how those businesses might differ from the equity Etfs and and that kind of ecosystem if at all and thank you.
Thank you and there is not a major change and the distribution strategy.
Dan Draper, who joined US a middle of the year last year has put in place and excellent strategy to look across all of the different types of asset classes, we want to be covering which include multi asset classes looking at whats all of the major trends and the ETF markets of the mutual fund industry as well as private investors and finding ways for us.
To bring the solutions that they need as you can see from the growth in the market. The growth is coming across many many different types of asset classes, including fixed income and equities global equities commodities real estate etcetera, and so we want to be able to approach all of the different channels that we have with this broader set of <unk>.
Capabilities and broader set of indices and so it's not going to be so much of change and distribution strategy, it's a change and the capabilities and the breadth of the different kinds of products, we'll be able to provide.
Got it makes sense thanks, Bob Thanks, Andrew.
Thank you. Our next question comes from Jeff Silber from BMO capital markets you May ask your question.
Thanks, So much about you were kind enough earlier and it gives us a little bit of color on the revenue guidance for the ratings segment. I was wondering if you can get similar comments on your on the three segments. Thanks.
Of course, Jeff a mid single digit growth is the expectation for market intelligence and platts and the mid to high single digit revenue growth expectation for the index business and then on the enterprise basis mid single digits for for this year.
Alright, great sounds like you were preparing for answering that question and I appreciate that.
Moving back to your slide presentation, and I think it was slide 19, where you talked about the shift in global issuance among the different aspects I'm. Just wondering is there a meaningful impact either on your revenues or margins because of the shift. Thanks.
Let me take that one Jeff well first of all as you know there's always a lot of shifts around the around the different kinds of the issuance and just a couple of examples in the in the fourth quarter, while the of corporates were only up two 7% in the U S financial institutions were up almost 27% and the.
Same time structured finance was down 27% globally. So you always see this kind of of mix in the in the aspects of the industry of the ratings business. We see generally speaking fees based on the size of the transaction force of structured finance based on the complexity and size of the.
Of structured loans of if you look at.
Leveraged transactions high yield bonds et cetera, generally speaking, we do get higher fees from those types of those types of asset classes.
Okay, Great. That's really helpful. Thanks, so much thanks, Jeff.
Yes.
Thank you. Our next question comes from Owen Lau from Oppenheimer, You May ask your question.
Good morning, Thank you for taking my question.
Doug you mentioned that there have been some high profile of default in China and days and increased sensitivity and the quality of local rating could you. Please talk about your recent conversation with China. On this topic is any short term solution and does it accelerate the timeline for China to open up its capital markets.
Thank you.
Well as you know we've been encouraged as the Chinese bond market continues to develop the this is something that despite me, saying that there had been some defaults, it's not that I'm encouraged about the defaults, but what you see now as the regulators of really starting to pay attention to the quality of the ratings and the markets as well as the market.
<unk>, we have seen recently that the regulators have started to put in place some new discussions around eliminating the double a floor for the insurance industry. They are also looking at seeing if theyre going to have a new approach to regulating the ratings industry. So there's also been some interest among a specific marker.
Participants at a recent report we put out which showed what the spread would be of a different bonds that you compare them to of ratings rating scales. So we're very encouraged of the Chinese bond market and continues to develop the regulators are focused on it and most importantly, investors' themselves are looking at seeing how they can drive a much higher quality.
The credit ratings industry.
Got it that's very helpful and the.
And in terms of your of Blockchain initiative and I think Doug you also mentioned the strong previously for the renewable energy could you. Please skip on that.
Give us an update on that project and then also I remember like two or three years ago. You also mentioned the project at the Port of Fujairah could you. Please and also give us an update as well. Thank you.
Yes, we think the blockchain is one of the areas that we'll continue to develop and financial markets from the point of view of contracts specialized contracts the ability to gather data and a way that becomes reliable and it becomes unchangeable and so the place that we've been working on this and the company is through Platts. The first application was and the Fuji.
The report where now all of the participants and that major port of provide all of their data through of blockchain application that goes to the regulators and then we have access to that to be able to use it for pricing for references as well as for our news and then we recently worked on the <unk> project, which allows us to also get that same kind of information.
And in other market as we advance this is something that we're learning across the company. We think blockchain will be an area of that with IHS market. We can advance our work and we're very pleased that we were able to have some initial wins in the and especially with Fujairah and then and the in Rotterdam.
Got it thank you very much thank.
Thank you Owen.
Yes.
Thank you. Our next question comes from Craig Huber with Huber Research Partners you May ask your question.
Oh, great. Thank you two questions, maybe I'll start with the start with.
He's out of or Doug maybe talk about this.
Merger of the the playbook of the similarities you guys put in place here I'm trying to think about this versus where your company was that versus the three for five years ago. When all of the changes you guys put in place to raise margins and increase the efficiency and S&P legacy and what you learned there and do you plan on employing on the on.
And on that side of the business on for IHS going for can you talk touch on that briefly please the playbook.
Yes, so of Craig Let me start. This is this is something that we've thought a lot about and when we were working on this idea of with our management team and our board of directors one of the most important questions that I asked and we had good discussion of the board is do we have the capacity to undertake a transaction like this and that includes our manager.
And capacity our people our team of our technology what are the lessons learned we've had do we have and in particular the ability to undertake and integration like this and and one of the other questions. We asked is and what kind of talent will IHS market bring as well and as we did our due diligence and we already knew the team, but as we got to know them.
Better we were impressed that they were also going to bring the really high quality management team that would be complementary to ours and the together we could actually undertake something like this but one thing that we've done over the past five years as we put in place of very disciplined approach to managing the company and it it starts with an annual plan that we look at.
With the board of directors, we agree on it then leads to goals and objectives, which feed into our own performance individual performance goals as well as our divisional and functional performance goals. Those include areas that are customer operations people. So it's not only driven by financial performance. We also include operational targets.
Which includes risk management target. So we put in place of management the management system, which we think will work very well with the IHS market team and if we wouldn't have had the confidence that we had that that process in place now for many years that we've been delivering and we have the capacity to do something like this and.
Along with the quality of the teams coming along we would not have undertaken something like this.
And then my follow on question is more of a nitpick here the non transaction volume within a range you touched on this belief of the obviously is up 15% or so year over year. It was also up 15% coincidentally versus the average of the first three quarters. As you know you talked about guidance for this new year and think about mid to high single digits for non transaction of ratings for the new year.
And which is higher than generally runs out.
But if you just annualize that for 51, yet for non transactional readings and your point that for all of next year and year over year basis will be up about 11%. So clearly there must be something sort of onetime in nature of that would benefit you guys and non transaction of the ratings and the <unk>.
And just touch on and I'm, just trying to understand the rate increase you out there. Thank you.
Yeah, correct. That's the that's a great observation, 15% east of non transaction reported revenue growth, 11% ish to organic non transaction revenue growth. The difference of the 4% is driven mostly by crystal and Crystal acquisition of Greenwich Associates granted so.
<unk> has a certain.
Pets are and in terms of recognizing revenues and expenses that is mostly in the fourth quarter of every year given their level of activity. So thats why the difference between organic and reported non transaction also base of larger than normally you would see in a particular quarter, but that was driven by that particular app.
Acquisition, therefore, 11% is more of what you should look at from an ongoing basis organically and then we set dose one third is coming from D.
Revenue coming from non transaction revenues from our surveillance and then other one third from the rating evaluation surfaces that we also expect to be strong in 2021. So therefore, the mid to high single digit growth outlook for non transaction this year.
Thank you.
Thanks, Craig.
Thank you. Our next question comes from Hamzah <unk> Macquarie from Jefferies. You May ask your question.
Good morning. Thank you on my first question is just on the market intelligence margins.
Could you maybe talk about.
How are you thinking about margins here is this sort of a crop of margin and be better from here just given some of the investment spend.
And and just given your longer term target for the segment being you know I guess mid to high Thirty's.
Good morning, and Hamzah, if you look at the market intelligence margins for.
For 2020, they were for the full year up 30 basis points and what you see as underlying growth from operations and the normal operating leverage that the business is having but then the offsets or some of the acquisitions that were margin dilutive for example, the $4 51.
Research and acquisition as well as the investment spend and the investment spend should translate in 2021 and two additional revenue growth. So we should start to see the benefits of the OS investment spend in 2021 and also overall of the investment spend for market intelligence will come down a bit so overall.
We will expect that the operating leverage will be stronger and therefore also the margin expansion will be stronger for market intelligence in 2021, and so what we overall expect the margin market intelligence margins to see quite a nice increase during this year.
Great and then just a question on on on the deal.
Is it fair to say that you know don't expect any new information until the deal closes on around sort of synergies revenue synergies cost synergies cash and integration costs or do you expect to sort of release of information as youre going through this replanting trees.
Hamzah and.
Of course, we are going through the planning phase of lot of work is underway more work to be done up to deploy and that we will close and.
At this moment. This is the information that we can provide to you as you know the S. Four is now effective and.
And would expect some updates closer to the close of the merger itself or both of the merger.
Self so we are not really planning to give any changes and updates between now and the close.
Got it thank you so much.
Thanks Hamzah.
Thank you. Our next question comes from Simon Clean with Atlantic Equities, you May ask your question.
Hi, everyone. Thanks for taking my questions.
I was wondering.
Going back to the the.
And sort of innovations and products that you outlined from your.
10 show our capabilities.
Could you just talk about how those kinds of.
The new innovations feed through to actually incremental revenue opportunities for you every time in terms of the.
The process.
Distributing them as customers and when you actually start monetizing them and then all of these the kinds of things that are built into your expectations for revenue synergies and part for for.
For the IHS measure as well.
Yes, well first of all let me, let me mention that when we talked earlier about some of the growth that we've seen and the can show indices, where we grew 10 times and in the Spider Ken show, New economy and to see that's something that threat and directly drives revenue, we have other areas, where something like our omni.
Search, which has the ability to have and intuitive search tool on our market intelligence platform, that's something that drives traffic and it drives retention. It gives you a superior ability to gather data from the market until link it and so that again is something that drives retention and another example would be something like we talked.
Before about being able to ingest of 11 million New company data from groups like prequel into our private capital information and something like that drives the ability for us to have unique data faster than any other organization and another example of that would be something like market on close in platts, where we saw.
Started off with one pilot and now we're up to 80 different commodities that are using a new process. It gets our information of the market, 80% faster. So we think that all of these whether it's its efficiency its data linking its actual products themselves that are being delivered by can't show all of those at the end of the day helped drive customer experience or directly drive.
Revenue.
And Simon if I may build on Ducks and Sir.
The revenue benefits from can show you see now within the deficient and so its all recognized within the divisions I think over time, you would see more also external revenue froemming from Ken show again, it's almost essential capabilities are now offered on the marketplace for sold directly to short term customers. So that's the benefit that.
We'll come in so painful pension was pivoted more internally for the first periods, but we see a little bit of change more pivot to an external focus again over the next step periods and then to the last part of your question what could this do for the merger and at this moment and in terms of the merger synergies we had not.
And any benefits from potential. So we're actually also excited to see what can't you can do and I cannot wait to see if we can unleash can show and we have had some first blending meetings around that as well. So it's definitely going to be a very interesting element to the merger and some of the upsides of the merger going forward.
Yes.
And that's really useful thanks, very much and.
I guess my follow up question.
And welcome to the ESG business.
And I guess, what I'm thinking about it.
How do you see the evolution of your business.
Particularly with the rupee cause some set of assets you have and evolving that over time to become something more nimble and more flexible as opposed to just the annual survey.
And how you might be able to use that to.
The two really service and scientists of servicing the corporate clients for their ESG needs.
Perhaps you could talk about that opportunity.
Yes. This the ESG is definitely one of the most exciting areas for us at the company. As you saw we had $65 million of revenues last year, which had been growing at a 40% pace and when you bring the capabilities of IHS market together, we're gonna have scores and time series workflow platforms, we're going to bring emissions data from IHS market.
And at IHS market market also has the fixed income indices and.
And they've got information about plastics and other sorts of model of metals that are used and batteries. So bringing these together and going to be something that are really new for us and let me give you a couple of examples just imagine if you were of Chief Sustainability Officer, you mentioned and the corporate clients corporate clients are increasingly either through the treasure.
Or directly of sustainability officer looking at how their own company is going to perform and what is their own individual approach too.
To running their sustainability programs, we're going to have the tools to provide them of rating, we're going to build and they're gonna have the CSA, we're going to have the ability to provide them with more data to benchmark against other third parties and then when you think about IHS markets ESG reporting repository of the carbon data that they bring.
That it will allow them to have the workflow tools. We think that this is one of the areas that will actually allow us on our own and then together with IHS market. It would be really building, a very relevant and very powerful ESG model. One thing I would and with is that we just launched a new ESG website I would recommend that everybody.
Go look at it and you can immediately look for ESG scores of companies on it and then it has tiles of all of the different capabilities that we have and so this is something for us youre going to see a lot of investment here a lot of focus on ESG. It's one of the most exciting growth areas and the company.
Alright, Thanks Robert.
Thanks Simon.
Thank you. Our next question comes from George Tong from Goldman Sachs. You May ask your question.
Hi, Thanks, Good morning Hugh.
Global debt issuance to be up 3% in 'twenty and 'twenty. One can you elaborate on how you expect individuals' the categories to perform including investment grade high yield loans and the structured.
Sure George This is Doug I'm not quite sure if I can give you all of those categories, but what we've looked at in 2020 as I mentioned earlier, it's about a $2 seven or let's say a little bit close to 3% decrease for the year, but that includes financial services that we think will be up 3.5% structured.
Structured finance up two 5% offset by corporates, which would be down a little bit over 8% and U S. Public finance down about 5%, we do see a lot of demand coming from the M&A area, we think that between specs and what we see there the activity from Spacs and other general M&A.
The pipeline is growing and typically a lot of that is more on the high yield area, but in terms of high yield versus versus.
The versus other types of I don't I don't really have anything further on that but we do see that this year there should be a very different mix and we've seen in prior years.
Got it that's helpful and Doug it's been two months since you announced the merger with by just market. One of additional findings have you had on the strategic opportunity. During the course of due diligence of would you like to call out.
Well, there's a couple of I would call out that are maybe beyond what we had originally thought one of them is what I call private assets or being able to support the private equity industry. When we originally looked at this we started looking at areas that were maybe a little bit more obvious and financial institutions and what we could do for debt capital markets for.
Corporate treasures and one of the areas that I see a lot of upside is and what we call private market private equity you think about how much longer assets are staying private before they go public or the information that people would like to look at for their supply chain and when you put the two companies together you have tools that.
At the IHS market, which for valuation I, Val and <unk>, they've got the port portfolio monitoring tools I level as you've heard me talk about earlier, we've been ingesting data from people like prequel and into our tools and then we've got the information from four of five one research from money market directories are.
The market intelligence platform and you put all of these together and it's going to be a very complete set of services of workflow tools valuation tools reference data.
The fundamental data about corporations that we wouldn't have been able to do alone and so that's one of the areas that I was quite excited about I also mentioned, what we'll be able to do with the ESG. That's another area. That's the upside I think there is higher than what I originally would've thought and then finally, when we look at energy transition, which I.
I think of energy transition as part of the ESG, but for climate change and the interest that this is generating its not always directly the same thing as ESG. This is another area that between what we've got and market intelligence and ratings, but and that in with what we have between platts and the resources business at IHS market theirs.
Can be a lot of opportunities in new energy New energy investments are all of the things that are involved and EV, which also will bring some of the capacities from the transportation business at IHS market. So on energy transition I think this is also another area that is well beyond what I, probably originally contemplated.
Very helpful. Thank you.
Thanks George.
We will now take our final question from Manav Patnaik with Barclays. You May ask your question.
Good morning, and thanks for squeezing me in here guys.
And to follow up on the ESG and I apologize if I missed this earlier, but the $65 million of revenue for the year.
Did you break that down between you and research and data and perhaps in the in the seeds and just on talks and the growth rates in the and the potential mix changes Yang speed and that portfolio of evolves.
Good morning amount of if you look at the $65 million, which is 47% over 2019, we're not really breaking it out for each of the deficient and initiatives, but directionally. How you should look at it is the platts energy transition initiatives are.
<unk> part of the revenues today.
That's what we're seeing is particularly high growth of new initiative, the ESG score Green evaluations and ESG indices fees, so, particularly all of the new initiatives are growing very fast and and all of that together is driving this revenue growth up going forwards and Doug.
And that's giving you some of the statistics and data for example, underneath some of the ETF AUM that are using our ESG indices and so overall I think it's really across the board, but at the current macro level I think platts is of significant components of the of the overall revenues.
Got it that's helpful. And then I guess, just staying on tax and the mid single digit growth.
I guess the estimated for 'twenty. One you know platts has historically always been for the resilient and see what happens and the energy market.
And the the IHS as it has been much more sensitive and I was just curious how you guys look at you know 21 and perhaps the beyond in terms of you know how of that.
And the G market fits into your strategy.
Yes, we are very encouraged about the opportunities to bring the resources business of IHS market and Platts together I think it's very complementary I think that will be a very large benefit for our customers with platts, having particularly of focus on price reporting as you know and that is quite steady and stable the resource.
This business of IHS market that is going through a transition for more upstream to more downstream. The upstream business has seen some headwinds and might continue for a short period of time, but particularly downstream analytics is doing very well so the opportunities to bring that together and and so.
And look at the commercial opportunity for the combined company is actually very attractive and think about what we can do with respect to metals and mining I think about the what we can do for with respect to the analytics platforms, bringing that together for our customers think about what we can do with the data on lake.
And platts analytics growth by unlocking the value of the data of IHS market resources. So we're actually very encouraged and we think despite some of the changes structural changes and the industry that we can help our customers, particularly also with energy transition.
Thanks for that.
Thank you very much.
Like to just provide a couple of closing comments and I want to thank everybody for joining our call. This morning and for all your questions and your support as always as you saw at 'twenty and 'twenty was a very strong year for us during difficult circumstances, we made a lot of significant progress along the way with areas that we've been investing and over the last few years as you know.
We had put in place investment programs and we started seeing them pay off as we called it the year of the product launch and it has to do with our technology, our innovation productivity programs. We've put in place. We're very proud about what we're doing and China and the progress and advances that we're making there our ESG program is starting to really take off.
And we think we're very well positioned and then our own internal environmental performance and social outreach and our own ESG approach. We think is something thats very important for our company and of course, what is really most important for US. This year is to continue to stay focused on the IHS market merger. We're so excited about that we're always <unk>.
First with the people, we meet with the capabilities with the products with the reach that they have and we think that that's going to allow us to of a very strong.
Opportunity in 2021, and beyond and as I've said all along during.
During last year and before we could have never made this progress without our people and the talented people and we have that are working very hard, especially in 2020 during uncertain and difficult circumstances and I want to thank all of our people again, everyone has done a fantastic job. So thank you everyone for joining us again today and we look forward.
Two continuing to talk to you throughout the year. Thank you very much.
That concludes this morning's call of PDF version of the presenter size is available now for downloading from Investor The SP Global Dotcom.
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Of course with audio and slides will be maintained on S&P Global's website for one year the.
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Behalf of S&P global and we thank you for participating and wish you on that day.