ii view: exhibitions is Informa's growth driver

Suffering a tough pandemic but with the shares making progress since autumn 2020. We assess prospect for this FTSE 100 company.

19th November 2024 11:53

Keith Bowman from interactive investor

Ten-month trading update

Revenue up 10.7%
Continues to expect full-year revenue of £3.5 billion
Continues to expect full-year adjusted operating profit of £975 million

Chief executive Stephen Carter said:

"Informa continues to deliver a strong performance in 2024, with forward bookings providing momentum into 2025."

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ii round-up:

Publisher and exhibitions organiser Informa (LSE:INF) today maintained full-year forecasts, flagging forward booking momentum into 2025.

Group-wide revenue for the 10 months to late October rose 10.7% year-over-year, in line with management’s previously upgraded estimate but marginally below some City forecasts just over 11%.

Shares in the FTSE 100 company fell 2% in UK trading having come into this latest news up around 9% year-to-date. That’s similar to advertising giant WPP (LSE:WPP), although behind a 16% improvement for fellow exhibitions organiser and scientific research publisher RELX (LSE:REL). The FTSE 100 index itself is up 4% in 2024.

Informa operates across the four divisions of Markets or exhibitions; Connect, organising on-demand experiences and seminars; Tech, specialising in technology company clients; and specialist knowledge research publisher Taylor & Francis.

Markets led growth during the 10-month period, climbing 13.5%, followed by Tech at growth of 11.2%, Taylor & Francis with a 10% gain, and Connect up 4.9%.

Following a recent £1.2 billion acquisition of events organiser Ascential, Informa reaffirmed previous estimates for 2024 revenue of £3.5 billion and adjusted operating profit of £975 million. That’s potentially up from 2023’s £3.18 billion and £854 million outcomes.

The newly acquired Ascential business will form the backbone for a new Festivals business come 2025. Structural growth in Business2Business (B2B) and academic markets is expected to underpin targeted groupwide underlying revenue growth of around 5% from 2025 to 2028.

Broker UBS reiterated its ‘buy’ stance on the shares post the update. Full-year results are likely to be announced early March.

ii view

Founded in 1998, Informa today helps businesses to connect and make better informed decisions. Markets, organising transaction oriented events (B2B) and the biggest exhibition organiser globally accounted for half of total sales in 2023, followed by publisher Taylor & Francis at 19%, Connect at 18% and Informa Tech the balance of 12%. Geographically, North America generates close to half of sales, with China another key market at 14%, and the UK coming in at 6%.

For investors, an uncertain economic outlook and tensions between the West and China, a key marketplace for Informa, are not to be forgotten. Group net debt rose in 2023. Costs for businesses generally remain elevated, while a forecast dividend yield of around 2.3% is below the 4.5%-plus at media rivals WPP and ITV (LSE:ITV).

More favourably, a strategy focused on specialist markets, unique content and internationalisation is generating growth. The deployment of artificial intelligence is delivering product benefits and operating efficiencies with a partnership with Microsoft Corp (NASDAQ:MSFT), under which it will pay Informa fees for access to its data. An end of 2023 net debt-to-adjusted profit ratio of 1.4 times remained within management’s comfort levels, while increasing profit and cashflow has expanded shareholder returns via share buybacks.

On balance, and despite ongoing risks, a focus on data and a consensus analyst fair value estimate above 975p looks to offer grounds for continued longer-term optimism.

Positives:

Diversity of businesses
Over £1.45 billion of share buybacks since 2022

Negatives:

Uncertain geopolitical global backdrop
Exposure to currency moves

The average rating of stock market analysts:

Buy

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