Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

FTSE 100 events and information business looks an interesting investment proposition

FTSE 100 media firm Informa (INF) is worth checking out ahead of an event today (15 Jun) when the company will provide an in-depth explanation of its business to analysts and institutional investors. This could stir up more interest in the shares.

Larger companies circle

A first quarter trading update at the end of May was solid rather than spectacular. The company reported a strong performance for its Exhibitions and Business Intelligence divisions (running events and digital subscription products respectively) but was more downbeat on the Knowledge & Networks and Academic Publishing businesses.

Overall chief executive Stephen Carter signalled the company was on track for a fourth consecutive year of growth in revenue, earnings and cash flow.

How does the valuation stack up?

Although it is a multi-national group with offices in more than 40 countries and upwards of 7,500 staff, Informa falls into the category of lesser known FTSE 100 firms. Broadly it can be placed in the same category as RELX (REL) and UBM (UBM), offering a mix of events and professional information services.

At 14.4 times forecast 2017 earnings per share it trades in line with UBM on a price-to-earnings (PE) ratio of 14.3 times, but lower than RELX which trades on 20.8 times 2017 forecast earnings. Informa also offers the attraction of a 3% prospective yield.

Formed through the merger of IBC Group and LLP Group in 1998, the company has expanded rapidly in the intervening two decades through acquisitions. It agreed to buy Penton Information Services for £1.2bn in September last year, and successfully fought off takeover attempts by UBM and a private equity consortium in 2008.

Its most enduring brand is Lloyd’s List, now a digital-only product covering the shipping industry which has been in existence in some form since 1734.

Just under half of the company’s revenue is derived from the events space. We like events businesses because they are typically cash generative, have solid visibility with plenty of recurring revenue and, for the right events, the barriers to entry for competitors can be significant.

#Lightbox: Education+

What are the risks?

Like Pearson (PSON), Informa has experienced weaker demand for physical academic text books and plans to divest its Garland Science publishing house targeted at undergraduates.

In 2016, 43% of the company’s revenue came from the US so its earnings are sensitive to the performance of the dollar against sterling. The 2016 results also saw significant adjustments to profit, reflecting in part the acquisition of Penton.

We like Informa as an investment. Stockbroker
Panmure Gordon has a price target of 875p implying
nearly 30% upside at the current 680p. (TS)



‹ Previous2017-06-15Next ›