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At its core, Informa is a global events B2B business, enabling buyers and sellers to communicate and grow. The continued professionalisation of the events industry, coupled with growth-oriented audiences, makes for a strong structural driver. Informa has launched, acquired and grown some of the best B2B events in the world, creating a large, diversified portfolio of brands with excellent visibility and cash generation characteristics. Management have a record of optimising the portfolio and could crystallise T&F, the remaining non-event-linked publishing asset, to reinvest in higher-growth events. An asset swap for the RELX exhibitions unit would be elegant. A mix change of this nature would support INF delivering consistent high single-digit growth. INF guides to 6% for 2025 and matching the best-in-class - but it isn’t rated the same and that is a huge opportunity for investors – the stock could double as it sheds the pandemic history and investors focus on consistent quality growth. PLe 3yr earnings CAGR is 10% without assuming further buybacks, self-help or portfolio change. We want to own higher-visibility growth stocks with good management in a volatile world and INF is the wrong price. We rate INF as a BUY with 38% initial upside to 1200p TP.
Informa Plc
H1 25 beat Informa delivered a solid H1 25 set of results with organic revenue growth of 7.8% coming in ahead of Bloomberg consensus of 7.4%, driven in particular by a strong June in the B2B division (up 8.5% vs. 8.3% for the first 5 months). Academic has benefited from another one-off AI licensing deal while TechTarget continues to suffer from the Big Tech advertising cycle as well as integration issues. Operating margins grew 80bps YoY to 28.4% and beat consensus by 80bps. H1 EPS came in 6% ahead of consensus at 29.8p. Outlook raised Management has also raised its FY25 outlook as it now expects 6% underlying revenue growth (vs. 5% previously) and 10%+ adj. earnings growth. Despite the weakening USD, we increase our EPS ''25 and EPS ''26 by 3%, reflecting top-line growth and margin efficiency. While the US/China trade war is reportedly impacting growth in Informa Markets China (below 5% in H1 25), the overall macroeconomic environment (incl. tailwinds from the Middle East) supports this outlook upgrade. Good visibility on H1 26 supports increased share buyback Management also communicated that GBP0.5bn of H1 26 revenues had already been booked and that its forward events bookings are growing. Solid forward visibility and a strong H1 25 has led management to increase its FY25 share buyback programme by GBP150m to a total of GBP350m. Outperform rating reaffirmed Informa trades on 8.5% 2026 equity FCF yield. Concerns on its capital allocation policy have been well addressed by the implementation of a recurring sizeable share buyback programme (40% of FCF25e). While consensus was expecting a significant slowdown in H2 25, management has actually raised its full-year outlook. Yield and volume growth are likely to sustain further top-line growth and margin expansion into 2026. We reaffirm our Outperform rating and 950p TP.
Strong H1 results Informa has reported impressive H1 results today, with revenue at £2036m, up 7.8% organically, c.2% ahead of consensus, EBITA of £579m (reflecting more than 20% growth) was 3-4% ahead of consensus. By division, events saw a very strong 8.5% growth, with academic publishing up 11.9% helped by further new AI licensing deals in the period – TechTarget saw declines of 4.3% (modestly better than previously guided). Guidance raised Management flag the notable visibility in the business, with £3.1bn of revenue committed (c.80% of FY) at this point, and note that revenues committed for 2026 are running up 15% yoy currently. For the FY, management raise organic growth guidance to 6%, driven by raised guidance for events (now +8%) – and also raise FY EPS growth guidance to 10%+ despite the incremental headwind from the weaker dollar since the previous guidance was set. They lastly also announce an incremental £150m share buyback program. Higher multiple warranted More broadly, management continue to highlight their execution of a 4 year strategic plan to maximise organic growth from the platform – we continue to believe that the track record of strong, resilient growth despite macroeconomic volatility warrants a higher multiple than the current 14x CY26E PE, relative to RELX at 26x. Informa host a results presentation at 9am.
Informa Plc RELX PLC
What happened? H1 results Informa just reported H1 results with group underlying revenue growth reaching 7.8% and driven by 10% at Informa Markets (vs. Bloomberg consensus of 8.8%) and 6.4% at Informa Connect (vs. cons. at 6.2%). Informa Festivals saw 5.2% underlying revenue growth (no Bloomberg consensus available) while Informa Academic''s reached 11.9% (vs. Cons. at 8.3%) helped by AI licensing deals. Informa TechTarget was -4.3% (vs. cons. at -4.9%). H1 25 group adj. operating profit margins reached 28.4% up 90bps on last year and ahead of consensus at 27.6% leading to an H1 group EPS of 29.8p, 6% ahead of Bloomberg at 28p. In terms of outlook, management has raised its outlook and now sees FY25 group underlying revenue growth of 6% (vs. 5% before) and Live B2B Division at 8%+ (vs. 7% before). Management confirmed its guidance of FY25 revenues at about GBP4bn, ahead of consensus estimates of EUR3.97bn and despite further weakening of the USDGBP sees adjusted earnings growth of 10%+ in FY25. Management has also increased its share buy back by an additional GBP150m (vs. GBP200m initially announced). BNPP Exane View: We expect a positive share price reaction given the solid H1 revenue and margin performance and the upgraded FY25 guidance. We also believe that raising the share buy back is a strong and positive signal that forward booking and onsite rebooking trends are supportive of a further solid H2 25 and H1 26 performance. Informa trades on PE25 of 14.3x and offers a 7.0% equity FCF yield growing to 8.4% on 2026 numbers.
Robust trading continues Ahead of their AGM later this week, and an investor visit to Cannes Lions event today, Informa have released a short trading update: the company has reported 7.9% organic growth for the first 5 months (versus 7.6% in Q1), including the newly consolidated Nasdaq-listed TechTarget business which delivered a 5% decline in the period. The events portfolio (across the 3 parts of Markets, Connect and Festivals) saw 8.3% growth, supported by broad international strength and a growing IMEA footprint, whilst Academic publishing reported an impressive 13.7% growth given the signing of more non-recurring AI licensing agreements (the core growth trend remains at c.3-4%). Focus on capturing organic growth More broadly, management note their high visibility (with c.70% of FY revenues booked), the ongoing share buyback program (we assume £300m in forecasts but see scope for this to prove conservative) and the ongoing progress of their ‘One Informa’ strategic program out to 2028, with the aim of maximising organic growth from the B2B platform built in recent years. On guidance, management reaffirm FY organic growth guidance of 5%+ (with Events at 7%+) and update earnings guidance to reflect the weaker dollar – they now expect ‘c.10% earnings growth’ vs ‘double digit’ before (although we already assumed 9.4% growth in FY25E at an average £/$ rate of 1.30). Re-rating potential As confidence in the resilience of the increasingly data driven events industry builds, we see scope for significant rerating from the current 13x CY26E PE, a record discount to RELX.
What happened? Informa just published a solid trading update with underlying revenue growth of 7.9% for the first 5 months of the year (9.3% excluding Informa Tech Target consolidation). In particular, B2B Live Events revenues are up 8.3% and Academic Markets are up 13.7% as the company has continued to sign non-recurring AI licensing deals. Excluding AI deals, core Informa Academic underlying revenue growth is indicated at 3-4%, broadly in line. Informa Tech Target has seen revenues decline 5% with improving momentum from Q1 into Q2. Informa Tech Target Q1 results will include a non-cash impairment reflecting continuing market softness. Informa has reaffirmed its full year guidance of 5%+ group underlying revenue growth. Bloomberg consensus stands at 4.2% and we assume 4.8%. B2B Events is guided to grow at 7%+ (BNPP at 6.9%). BNPP Exane View: We believe Informa has produced a solid trading update likely to be supportive of the shares today. Informa Tech Target is running below but the key B2B events business and Academic Markets look strong. Management has confirmed its full year guidance (albeit adjusted for FX movement in USDGBP which consensus already partly captured) and sees group revenues at over GBP4bn (vs. Bloomberg consensus at GBP3,997m). Informa offers a 7.2% equity FCF yield for 2025 and trades on a PE''25 of 14x. Shares are down 5% relative to the sector over the last 3 months. We believe today''s solid trading update could push the shares up LSD.
Informa Connect event visit Informa yesterday hosted an investor / sell side visit to their Super Return conference in Berlin (joined by the Informa management team) - at a group level, in-line with commentary from our recent CFO event, management re-iterated a robust message on current rebooking and yield trends in the exhibitions industry, despite macro volatility. The event (focused on private capital investors) is a key part of the c.£150m Global Finance vertical within the Informa Connect division (c.15% of group revenues), and is seeing double digit growth in attendees (as witnessed in the scale of demand to listen to Serena Williams present, as just one example). A customer panel highlighted the importance of it in the ecosystem, with the customers noting that they expected to attend nearly 100 meetings during the week, saving them significant time and money, and that they would still attend even if the price was double the current level. Structural improvements A key theme was that of structural change in the events industry – AI tools now drive matching of attendees for networking at an incremental charge and the first-party data generated will increasingly be used for incremental lead generation revenue (for both attendees and others year round). Tech investments and operational restructuring in the current ‘One Informa’ program will also facilitate the uptake of these upsell opportunities – which should also underpin divisional margin expansion over time (our forecasts assume very little). Fundamentally mispriced On a separate note, ahead of the event, Informa’s Nasdaq-listed TechTarget business (of which they own 57%) finally reported FY24 results. Informa had already reported the headlines in their own results (TechTarget did flat organic growth last year) and had given some guidance for it in FY25 - this has been reconfirmed at broadly flat organic growth again (improving sequentially by quarter with growth in H2), and with EBITDA growth given over-delivery of cost synergies. Post share price falls, TechTarget is <5% of the Informa EV, but should offer another source of upside as tech marketing spend returns. More generally, as confidence in the resilience of the increasingly data-driven events industry builds, we see scope for significant rerating from the current 13x CY26E PE, a record discount to RELX.
Robust trading update Informa today has released a robust Q1 trading update – management confirm further strong growth in Q1 across both live events and academic markets, with the group up 7.6% in total (even with declines expected in TechTarget in H1). Management note their strong forward visibility, with >£2.5bn revenue traded, booked or committed, representing 61% of expected FY revenues. Within events, the company highlight that 55 of their top 100 trade in H1, and these underpin the FY target for 7%+ growth in that division. Guidance re-iterated Overall, the company re-affirm FY guidance for underlying growth of >5%, with a £4.1bn +/- revenue target and expected double digit earnings growth – this is based on a 2025 average £/$ of 1.27, below the current rate, suggesting some modest mechanical downward pressure on consensus should this be maintained. Resilience under-appreciated We upgraded to Buy in our January sector note (here) given our belief in the resilience of business – with exhibitions regionally focused and a key way to find new buyers / suppliers – we believe this is under-estimated by many, reflected in the fact the stock is now trading at <12x FY26E PE, less than half the level of RELX at 27x. Informa remains a key sector pick.
Informa reports 7.6% group Q1 25 organic revenue growth Informa has a history of providing its first trading update at its AGM in June. However, given recent market volatility, Informa decided to publish a Q1 trading update this morning. Management reported 7.6% group organic revenue growth (no divisional breakdown) with ''strong underlying revenue growth in both Live B2B Events and Academic''. It has reaffirmed its full year guidance. Informa reported to have 61% of full year target revenues booked as of today a number that is pacing ahead of last year''s. BNPP Exane View: We see this update as reassuring and likely to support the shares today (we see them up 3-4%). Q1 at 7.6% is running ahead of Bloomberg Consensus (based on old segments and not fully indicative of expectations). We understand that everything the company is seeing is on track with their forecasts at this stage. In particular, we note that Informa Connect Q2 25 revenues are looking good. Informa Connect is the most early cyclical part of Informa group and would be the first division to suffer in case of macro pressure in our view. We also estimate that over 80% of US B2B events revenues are from domestic participants (over 90% for Chinese events). We recently downgraded our group organic revenue growth forecast to 5% for FY25 to take into account H2 macro weakness. Informa is trading ahead and has reaffirmed its full year outlook. This reinforces the valuation appeal of the stock.
What happened? Informa TechTarget is 57% owned by Informa PLC and listed on the NASDAQ. Informa TechTarget has just filed with the SEC that it is unable to file its Annual Report 2024 within the prescribed time period. The company currently expects to file by April 15, 2025. It claims this delay is due to the timing of the merger (December 2nd) being close to fiscal year end coupled with the translation and alignment between US GAAP and IFRS. In addition, the company is to ''further evaluate technical accounting matters'' relating to FY24 and prior periods ''which may or may not require prior periods to be adjusted''. As part of that work the company expects to record a goodwill impairment of USD70 to USD110M on Informa PLC''s 2022 acquisition of Industry Dive. Informa paid an initial consideration of USD389m in July 2022 with a potential total consideration of USD525m when including earn-outs. The new management of Informa TechTarget is also ''working to finalize its evaluation of certain internal controls over financial reporting''. BNPP Exane View: We understand that the timing of the merger closing and US GAAP vs. IFRS accounting reconciliation may take a few days longer to complete. In particular, we understand the materiality threshold for old Informa Tech is now much lower. This requires auditors to control many more contracts that previously did not cross the materiality threshold when the asset was part of Informa PLC. In other words, while a USD5m contract at old Informa Tech may not have been considered material within Informa PLC (a group that reported GBP836m of EBIT in FY23), it has become material in new Informa TechTarget (a group with an estimated GBP60m of EBIT) and therefore requires additional auditing work. We also understand that the reference ''on the evaluation of certain internal controls over financial reporting'' is an acknowledgement of what old TechTarget disclosed in its Form S4 on October 23, 2024 and pertains to the fact...
Informa reports stronger-than-expected FCF for FY24 Informa had pre-released FY24 numbers at the Q4 update in late January which came in line with expectations; thus, focus for FY24 results was less on revenues and EBITDA and more on orgrev growth and FCF generation. At GBP812m, FCF was 12% ahead of consensus expectations. Organic revenue growth of 12% was slightly ahead of consensus'' 11% forecast, driven by stronger performance at Informa Markets and Academic. FY25 outlook in line despite change in format Management provided an outlook for FY25 in line with expectations, with 5%+ organic revenue growth in FY25 and double-digit adj. EPS growth. Informa will no longer provide an adj. EBITA range nor will it provide operating margins for Informa Markets, Connect, or Festivals now regrouped under B2B. While this will help simplify the reporting structure, we believe that the reduced disclosure may have helped push the shares lower yesterday. Our underlying organic revenue growth and margins are unchanged. Our EPS cut reflects the announcement of the disposal of Curinos, adverse forex moves, higher financial expenses and higher minorities. Informa to conduct recurring share buy-backs Informa has announced a Relx-like share buy-back policy where management plans to repurchase shares every year with the total amount dependent on MandA, leverage and other investment opportunities. We see this as a supportive development for the company. Outperform and 1,100p TP maintained Informa closed 6% lower, a strong reaction that presents a buying opportunity in our view. Informa''s orgrev growth and margin expansion story is intact. Forward bookings are solid and supportive of solid top-line growth. We continue to expect less MandA and more cash returns. The stock offers a 7.3% eq. FCF yield. Informa (+) remains our Top Pick in professional information services.
Robust FY results Informa has reported robust FY results today – with revenue of £3533m, up 12% organically, and EBITA of £995m, both in-line with consensus. EPS grew 11% to 50.1p, with leverage at YE of 2.6x. By division, Markets grew 14%, whilst the Taylor & Francis academic publishing business saw 15% growth boosted by non-recurring AI licensing deals. On the strategic front, a number of new announcements have been made: (a) as part of the ongoing pivot of the portfolio to faster growing economies (Americas/MEast/China already 85% of B2B revenues), Informa has announced a new JV with the Dubai World Trade Centre, which management expect to be earnings accretive in 2026; and (b) as part of a strategic review of minority assets, it has announced the recent disposal of its stakes in Lloyds List and Curinos for a combined >£200m, or >20x EBITDA. Momentum continues in 2025 On guidance, management expect 5%+ organic growth for the group in 2025, with revenue of >£4.1bn (in-line with consensus despite the announced disposals) and double-digit earnings growth – within this, management expect 7%+ growth in the events portfolio (INVe 5%), low to mid-single-digit growth in the TechTarget business, and 4% growth in Taylor & Francis (excluding AI deal revenues from the comparable base). Lastly, Informa has restarted a buyback programme – with £200m as a minimum this year – yet still expects leverage to return to the 1.5-2.5x target range this year. Deserving of re-rating After a sharp rise and then fall thus far in 2025, Informa is back to trading at just 10x EBITDA / 14x PE for CY25E, a still near record discount to RELX despite its own de-rating recently – uncertainty around US macro will likely persist, but – as we wrote in our January upgrade note (here), even if the multiple just holds, near 20% EPS growth this year should deliver equity outperformance. Informa remains a key sector pick in 2025.
TechTarget CEO interview The CEO of Nasdaq-listed TechTarget (N/R), Gary Nugent, on Friday was interviewed by the exchange to set out the aspirations and plans for the business, which was recently formed from the merger of Informa Tech and TechTarget. As a reminder, Informa owns 57% of the business, which has seen its share price under pressure in recent times; we believe highlighting the value creation opportunity at TechTarget (and hence merger rationale) is a key aspiration for Informa in 2025. Seizing the opportunity The CEO highlighted TechTarget’s key position in connecting buyers and sellers in the B2B tech industry, with a known permissioned audience of 50m across 220 publications that tech vendors want to sell too, and - uniquely - TechTarget’s data is enriched with data from Informa’s exhibition business. The market is estimated at $20bn, with the current $500m revenue run rate just a 2.5% share thus far, and after a period of cyclical weakness, AI is expected to provide an impetus to demand. We first discussed in detail the opportunity for Informa Tech to mimic the success of TechTarget in early 2022 (Build it and they will come) and we continue to believe that the combined entity can generate significant equity upside for its investors as the cycle turns and as the enlarged scale allows the company to better capture the addressable market. Value to be had At TechTarget’s current c.$1.2bn market cap, Informa’s stake is worth c.£575m, compared to the c.£850m / 12x EBITDA valuation we apply in our SOTP (or 64p a share). Whilst relatively small in the context of the overall group, we think the under-appreciated value at TechTarget is analogous to the investment case for Informa overall. Despite the sharp rally in the past fortnight, we continue to believe that - as highlighted in our recent upgrade to Buy (within sector note here) - Informa’s scale, resilience and increasing use of data is not properly reflected in the valuation at <11x EV/EBITDA / 15x PE, a near record discount to RELX (Hold, 3800p TP).
Despite 7 consecutive quarterly beats and raises, the Informa share price has remained range-bound in the last 12 months. Investors have voiced frustration, particularly regarding recent acquisitions. But we believe Informa shares are due for a catch up. We raise our TP by 10% to GBp1,100 - and with c30% upside, we reaffirm our O/P rating and select the stock as one of our Top Picks in Media. Entering a new phase of value creation: less MandA, more cash returns For the last 10 years, management has deployed its balance sheet to build the global leader in the events industry. We believe the end of the GAP II plans also marks the end of this active industry consolidation phase. 10 years ago Informa was smaller than the average exhibition organiser. It is now 8x larger and benefits from scale-related competitive advantages. The industry has consolidated. Informa has now built its empire of events assets. We believe the next phase will see management reap its harvest, focus on FCF generation and return cash to shareholders. Solid operating trends into FY25 We raise our Markets and Academic orgrev growth as the latest update of our proprietary Exhibitions Monitor points to 4% price inflation and 4% same-show exhibitor volume growth while our Open Access price tracker shows Taylor and Francis (TandF) is pushing 15-20% price increases in 2025. Our analysis of Festivals and TechTarget also points to upside vs. consensus. We lift EPS on underlying, forex and MandA. Valuation looks very supportive Informa trades at the bottom end of its peer group and at an, in our view, unjustified 50% discount to its closest peer Relx despite similar historical and forecast orgrev growth. We see FY25 guidance and the announcement of an annual share buyback programme worth 2% of the market cap as the next catalysts. Informa replaces Relx (+) as one of our Top Picks in Media and Internet. Also see PROFESSIONAL INFORMATION: The Science Map published today.
Robust trading continues Informa has released a robust 10-month trading update this morning – with group organic growth of 10.7%, supported by both key business areas (B2B Markets +11.1%, Academic +10.0%). Within B2B, the key exhibitions division saw 13.5% growth, and management note that forward bookings for 2025 are on track, highlighting that the major exhibitions scheduled for Q1 are running at 5%+ growth. In Academic, the high growth reflected $75m+ of AI licensing revenues from newly signed partners. On track for FY guidance Overall, management state that the company is on track to meet previously upgraded FY guidance – double digit growth and then (including the Ascential acquisition, which parts of consensus do not as yet) operating profit of £975m+. Elsewhere, the company announces the divestment of the remaining minority stake in the Maritime Intelligence business and highlight the forthcoming shareholder vote on the Techtarget merger on November 26. Longer-term, management re-iterate their aspirations in the 2025-2028 Informa program, for 5%+ organic growth p.a., and longer-term revenues of >£4bn. Maintaining momentum Having rallied in the past month, Informa shares are now trading at just over 10x FY25E EBITDA, or c.15x PE. This is far from expensive in our view, with the share price having largely reflected robust earnings momentum in recent periods (with upwards revisions continuing for longer than, admittedly, we expected). That said, there may well be a lull in positive catalysts for a time now, and with significant US / China exposure, fears over future tariffs / trade disruption in 2025 could weigh on sentiment and limit any re-rating somewhat.
Informa^ (INF, Buy at 841p) - Updating our estimates
Today's news and views, plus announcements from: INF, BDEV, ENT, CCR, AGR, MATD, SRC, & EQT.
Informa Plc Barratt Redrow plc
Informa beats H1 expectations Driven by 13% organic revenue growth at Informa Market (in line with BNPP, ahead of VA cons.), Informa reported 11% H1 organic revenue growth, translating into GBP467m adj. operating profit and adj. EPS of 23.8p, respectively 3% and 4% ahead of the Street. Informa raises guidance On the back of solid H1 trends in B2B Markets and further GenAI licensing deals, management has raised its revenue guidance to ''above the GBP3,450-3,500m'' previous range and raised its adj. operating profit guidance from GBP950-970m previously to ''up to GBP1bn'' now. We have raised our top-of-the-Street EPS forecasts by 2% for FY24 and leave FY25 largely unchanged on the tough comp base such deals create. Management bids to acquire Ascential for GBP1.2bn and intends to sell its other small stakes Informa has also announced a bid to acquire Ascential (FY23 revenues of GBP206m and adj. operating profit of GBP56m) for an undisclosed low-double-digit EV/EBITDA25 multiple after synergies and tax benefits. Ascential will be c5% accretive to group EPS and while the price feels punchy, we understand the strategic merit of further consolidating the trade show industry. Management has also announced it will explore the monetisation of some of the 7 equity stakes it currently owns. Outperform maintained Informa''s operating trends are strong. Our Faster for Longer thesis laid out in INFORMA: Faster for longer is taking shape. The 7% FCF yield 25e is attractive, in our view. Informa remains an active consolidator in the industry, but the Ascential bid marks the end of the capital reshuffling strategy announced 3 years ago. Bar another Covid event, leverage levels look solid and are likely to come down fast as management monetizes an estimated GBP350-400m of equity stakes. Remain O/P.
Informa^ (INF, Buy at 847p) - H1 beat and acquisition
Results ahead once again Informa’s momentum continues, in all senses. As a starting point today, H1 results were ahead of expectations, with revenue up 11% organically to £1695m, and EBITA up 19% organically to £466.9m, 2-3% ahead of consensus. As a result, FY performance is now expected to be above the top end of the guidance range, and management note they expect double digit organic growth and have ‘an ambition to deliver £1bn of EBITA’. Notably by division, Markets was up 12.9%, with strong events demand across all geographies, and Academic Publishing was up 7.5%, boosted by the recent AI deal with Microsoft. Informa highlights that it has now signed a second AI partnership and expects AI-related revenues of $75m+ this year. Management lastly have announced a review of the retained minority interests given the strong performance and interest from third parties. Ascential offer Informa have separately announced a 568p recommended offer for Ascential (N/R), representing a value of £1.2bn, with estimated £12m of cost synergies, plus other revenue synergies – combining these with tax benefits, Informa estimate a ‘low double digit’ EV multiple for the deal based on Ascential 2025 EBITDA estimates and expect c5%+ accretion to earnings. Pro-forma leverage is expected to be at the higher end of the targeted 1.5-2.5x range at YE. Earnings momentum continues Informa is currently trading at c10x FY25 EBITDA / 15x PE – as we have discussed previously, it continues to deliver impressive momentum in earnings, but a question still remains over the scope for re-rating if, as, and when that slows.
Informa is more than a Covid recovery story. Strategic initiatives should result in faster-for-longer growth. Our proprietary Exhibition and Open Access trackers lead us to expect positive surprises on consensus growth and margin forecasts for FY24 and FY25. This is not yet in the price, we think. Informa Markets shows scope for a positive surprise in H1 and FY24 Our BNPPE Exhibition tracker underpins our view that VA consensus underestimates FY24 same-show volume growth trends, pricing benefits and/or the contribution of new event launches. Initial data on 2025 shows look equally supportive of another year of consensus beats. More than a Covid recovery play. Strategic initiatives drive faster-for-longer growth Strategic initiatives are starting to pay off. New products contribute to faster growth and enhanced competitiveness. Geographic diversification into Saudi Arabia, India and Africa offers stronger potential than consensually assumed. We increase our group orgrev growth forecasts from 8.9% to 9.6% in FY24e, from 5.4% to 6.6% in FY25e and from 5.3% to 6.0% in FY26e. We raise our adj. EPS24e, 25e and 26e by 2%, 8% and 12% respectively and now stand 1%, 5% and 8% ahead of consensus. Informa Academic to see top-line growth acceleration, driven by OA and GenAI Informa Academic is benefiting from a GenAI boost now as it signs GenAI licensing deals for Big Tech to train its LLMs on its 170k-book catalogue. Our tracking of Open Access article volumes, pricing and market share underpins our view that orgrev growth can accelerate from 2% pa on average 2014-2023 to a sustainable 5% pa with a return to pre-Covid margin levels. Valuation is supportive. TP raised to GBP10 Informa offers a 7% FCF yield 25e and trades on a P/E25e of 14x. Our faster-for-longer scenario looks far from priced in. H1 results and further GenAI licensing deals should be key catalysts. We raise our TP to GBP10 (from GBP9) and reaffirm our Outperform rating with c16% upside...
Informa^ (INF, Buy at 860p) - Positive AGM update
Informa Plc OSB Group PLC
Today's news and views, plus announcements from: INF, 3IN, DLG, JDW, RSW, WKP, BOO & GRP.
Informa^ (INF, Buy at 821p) - Marching on
Reiterate Buy - While FY23 was a very strong year with sequential upgrades, we believe INF FY24/25 self-help momentum is strong and continues. FY24E EPS u/c with FY25 +2%. Above historic LFL growth rate is accelerated by reinvestment of proceeds from the well-timed Intelligence sale with over half
Informa’s FY23 results were strong, slightly ahead of guidance at January’s update. Underlying revenues grew 30.4% and adjusted operating margin expanded from 21.9% to 26.8%, with all four operating segments posting underlying revenue progress. The momentum has continued into FY24, and formal guidance has been edged ahead. The group generates significant amounts of cash, and leverage at end FY23 of 1.4x was below the guided range of 1.5–2.5x. With modest investment requirements and M&A opportunities of a large enough scale hard to come by, it seems likely that the share buyback programme will be extended further, underpinning the valuation.
Informa reported solid FY23 results in line with pre released numbers Informa reported FY23 revenues and adj. EBITA 1% ahead of VA consensus with EPS beating by 3%. DPS and FCF were also in line with expectations. With pre-released headline numbers in January, we point to the faster recovery trajectory in Informa Markets where adj. margins beat consensus by 100bps. TandF also surprised on its margin profile as it beat expectations by 30bps. This solid margin performance was mitigated by weaker results in Informa Tech and Informa Connect. FY outlook in line with increasing cash returns Management lifted its prereleased FY24 guidance by c1% on the back of a solid start to the year especially at Informa Markets. More importantly it announced a new GBP340m share buy back for FY24 and suggested that more cash would be returned in the absence of value-enhancing MandA by the autumn. Informa closed FY23 on 1.4x net debt to EBITDA and communicated a target range of 1.5-2.5x. Outperform reaffirmed Informa continues to offer one of the fastest organic revenue growth profiles in the Media and Internet sector at 9% in FY24. In the wake of Relx, management hinted that the medium term growth profile of the company could be slightly higher than previously assumed but kept its 5%+ numerical guidance. We have raised EPS 24 and 25 by 1% and 4% respectively on the buyback. We reaffirm our Outperform rating on its growth profile, on the argument that Informa Markets margin recovery is not fully priced in (BNPPE at 31.7% vs. VA Con. At 30.9% for FY24), on the exposure to the tech advertising turnaround and on the attractive balance sheet which we expect to be either deployed in growth- (and preferably value-) enhancing MandA as well as on higher cash returns. On 16X FY24 PE we consider valuation as supportive in the context of the group''s attractive growth profile and balance sheet.
FY23 figures slightly above forecast with upgraded FY24 guidance, higher share buy back and confident outlook. Expect modest single digit EPS upgrades with $ XR caveat. Buy - INF looks well-positioned and in growth mode. Robust event growth is accelerated by reinvestment of proceeds from the well-t
Robust FY23 results Informa’s FY results themselves came with relatively few surprises, given the detailed guidance on FY23 provided at the time of the recent Techtarget merger announcement: headline revenue of £3,190m (driven by 30% organic growth) and EBITA of £854m were both modestly ahead, with EPS at 45.3p (INVe 43.5p) and YE ND/E of 1.4x. By division, Connect was the outperformer vs our forecasts, with academic publishing org growth of 3% modestly below our forecast. Strong start to the year On the outlook, given the strong start to the year and with all businesses on track to meet management expectations, the company has upgraded FY24 guidance modestly – now expecting revenue of £3,450-3,500m (INVe £3,433m ) and EBIT of £950-970m (INVe £962m), with guidance set at £/$ 1.25. In particular, management call out the building strength of India and the Middle East as a growth driver in the B2B businesses, and reiterate the target for 4% organic growth in Academic publishing in 2024. Pulling all levers On the balance sheet, Informa are also now targeting leverage of 1.5-2.5x, and have announced a new £250m buyback once the previous program is completed, with scope to increase it if M&A opportunities don’t arise. On Techtarget, the deal continues to progress and remains on track for completion in H2 - as we wrote here, it is expected to be accretive in 2026. Informa currently trades at 11x FY24 EBITDA / 16x PE.
Informa^ (INF, Buy at 746p) - Circling back
Updating forecasts for the proposed TechTarget transaction, subject to shareholder approvals, with completion assumed Sept 2024. We forecast +3% underlying EPS upgrade post the recent update with TechTarget marginally dilutive in FY24/25E but guided to accretive in FY26. While a complex near term d
2023 EBIT to come in 1% ahead of VA consensus Informa reported its January trading update yesterday and guided for 30% underlying revenue growth in FY23 (vs. VA Cons at 29%) and for over GBP845m of adjusted operating profit (1% ahead of consensus) and over GBP600m of FCF. Management is to propose an 18p dividend. 2024 EBIT guided at GBP945-965m Management guided for FY24 revenues (excluding the Tech Target contribution) of GBP3425-3475m in line with consensus GBP3450m forecasts. It expects GBP945-965m of adj. operating profit. That looks a bit soft compared to VA consensus GBP966m. We note that management has a history of conservative guidance. We have maintained our top of the range forecasts unchanged. Informa Tech to be combined with TechTarget Management announced it is to contribute its Informa Tech digital assets as well as a USD350m cash payment into a new company merging with US listed TechTarget, a B2B digital services player. Informa will own 57% of New TechTarget and fully consolidate this US-listed entity. New TechTarget is guided to generate USD500m of revenues and to grow double digit in the medium term on 35% adj. EBITDA margin. Informa is an attractive but more complex story now With this merger, Informa is betting on a turnaround of the tech advertising cycle for which management sees burgeoning signs. It is also reinforcing its US market position as a leading technology marketing services business. While Informa''s main appeal remains the solid fundamental growth prospects of its events business, the story is becoming more complex now. Still with 9% organic revenue growth in FY24e Informa is likely to show one of the best growth profiles in European Media and Internet. Its PE24 of 16x and 6% FCF yield remains attractive and support our Outperform rating.
Informa^ (INF, Buy at 785p) - Positive trading and new digital initiative
Robust trading and merger announcement Informa unexpectedly released two statements late last night. The first was a full year trading update, noting their expectation for revenue of £3165m+ and EBITA of £845m – both are broadly in-line with our estimates (£3158m / £839m) – and giving FY24 guidance of revenues of £3425-3475m and EBITA of £945-965m (at £/$ 1.25). These are also in line with our estimates (INVe £3433m / £962m) – the company expects high single digit growth in their B2B assets, and an acceleration to 4% in academic publishing. Management note they have completed £1.06bn of the £1.15bn buyback program. Techtarget merger The backdrop for this is the second statement – Informa has announced a merger of its digital businesses within its Informa Tech division with US-listed firm, Techtarget. Informa will also contribute $350m of cash and will end up with a 57% stake in the Nasdaq-listed entity, with the business run by the current Informa Tech CEO. We wrote about the similarities of Informa's growing Tech division to Techtarget in early 2022 (‘Build it and they will come’). Presentation at 11am. Informa's assets generate $50m of EBITDA, with Techtarget generating c$70m – the Techtarget current EV is $1160m, with Techtarget trading currently at c.16x FY24 consensus EBITDA. The companies are targeting $45m of synergies in 3 years ($20m revenue based) and expect the deal to be neutral to earnings in 2025, and accretive in 2026, with a ROIC above WACC in 3 years. The deal is expected to complete in H2, with further details at the presentation at 11am. Informa currently trades at 11x FY24E EBITDA.
Informa delivered an outstanding 10-month trading update with only limited figures disclosed as usual. The company raised its guidance for FY23 and announced an extension to the share buyback programme. However, the management was relatively cautious for 2024 owing to the geopolitical tensions and a difficult macroeconomic environment.
Strong momentum in 2023: Informa’s trading update yesterday showed the impressive momentum currently in the business, with robust trading across the portfolio and notably strong growth in the key Markets division and signs of relative outperformance in Informa Tech. This meant guidance was raised again for FY23, and a step up in the buyback, albeit management noted there was a degree of future recovery in margins that had been pulled forward. Questions for 2024: Looking into next year, management remain quietly confident on the trajectory of growth, with no obvious signs of forward booking momentum slowing at this point. That said, there are still risks, with uncertainty over the impact of China macro trends, Middle East geopolitical events, potential reductions in funding for US academic institutions, and further M&A as Ascential undergoes its strategic review. Valuation support at least: On forecasts, we increase revenues by 3-4%, underpinned by the higher FY23E base and updated FX – the impact is moderately offset by higher minority payments to leave earnings up 2% longer-term, and we increase our target price to 800p in line with this. Informa trades at c.15x FY24E PE or c.10x EBITDA – clearly not expensive in absolute terms but, with cyclical macro risks still on the horizon, we believe significant further re-rating may be hard to come by.
Informa^ (INF, Buy at 739p) - Impressive momentum
Updating figures post a positive/strong 10M analyst call. FY23/24E adj FD EPS +7%/+2%. Remain BUY - call confirmed that B2B events are recovering globally, look positive for 2024, and we see a more exciting, focused strategy to grow events and beyond into broader digital service verticals. We are t
Informa^ (INF, Buy at 702p) - Strong update -FY23F guidance increased
FY guidance raised again Informa has reported a strong 10 month trading update – at a headline level, the company increases FY guidance to revenue of £3.15bn+ (previously £3.05bn) and EBITA to £840m (from £790m), whilst increasing the buyback program to £1.15bn (from £1bn) – management expect leverage at 1.3x at YE. Management note good momentum across the portfolio (org growth 31.7%), with the Markets division particularly strong at 65%, and the academic publishing business continuing at just over 3%. Underlying strength More broadly, management note FY23 revenues are now 20% higher than the 2019 PF level (excluding the Intelligence division that was sold) – and on the outlook, whilst recognising the various macro / geopolitical headwinds going into 2024, they highlight the forward visibility they have on £1bn of revenue at this point. We expect more detail here on the conference call at 8:30 – with key areas of focus likely to be a) any signs of slowing forward booking growth in China, b) scope for moderating academic publishing demand in the US, c) the trajectory of underlying tech marketing budgets, and d) potential appetite for further M&A in the context of Ascential’s strategic review. Valuation sensible As we wrote here recently (Pausing for breath), we continue to believe that – eventually – upgrade momentum could slow in 2024. The stock trades at 15x FY24E PE, or 11x EBITDA – not expensive, but not as stark a mispricing as seen in recent years.
10M figures are good referencing strength/momentum with a further FY guidance increase and extended share buy back plan. We expect our FY23E EPS to increase c. +5%. Move to Buy from ADD given share price upside vs our new PT. Events are recovering globally, and we see a more exciting, focused strat
Bond yields & AI dominate the debate: Having reached a high of >£27 earlier this year, two factors have weighed on the share price in more recent months: (1) The ‘quality growth’ nature of RELX has historically made it somewhat of a ‘bond proxy’ and fears over further yield increases have been a headwind. We may at least be not far from peak interest rate expectations at this point. (2) More fundamentally, the rise of generative AI gave much cause for concern. However, we believe these fears are profoundly mis-placed given open source tools do not have access to RELX content/data, and given the importance of RELX’s offering (and its accuracy) to its professional customer base. An AI winner: In contrast, RELX is set to be one of the key beneficiaries from generative AI. This should first become apparent in Legal, with the recent launch of Lexis+ AI, utilising third party models in combination with RELX’s proprietary, pay-walled content. Management note law firms will be charged incrementally for access to it (with significant interest already), given the value creation it can provide – assuming 5% of US customers pa sign up, at a charge of £3k pa, this could add 1% to Legal growth. Elsewhere, the test launch of a Scopus AI product in STM could generate meaningful opportunities over time - £50k of incremental revenue per academic institution from an extra 5% pa of the customer base would contribute c.1ppt to STM growth. Moving into a different league: New FX, tax and interest assumptions leave EPS 1-2% down long-term but our new 2850p TP is set in our updated DCF/SOTP range. RELX trades at c.15x CY24E EBITDA, a deserved premium to Informa but a notable discount to US peers. With AI helping RELX cement its place at the forefront of global data providers, we see no fundamental reason for global valuation differences and upgrade to Buy.
Quite the run: Informa shares have been very strong over the past two years, outperforming the FTSE 100 by >30% over that period. This arguably reflected a combination of a faster-than-expected recovery in exhibitions activity (particularly in China more recently) and the impressive rebuild of earnings to above pre-Covid levels as the proceeds from the Intelligence disposal were deployed into cheaper exhibitions acquisitions and a £1bn buyback. From a fundamental standpoint, the business is arguably structurally better placed than pre-pandemic, with less leverage and no banking covenants. Catalysts less obvious: That said, after more underlying upgrades, further acquisitions, and the provision of long-term margin targets (30% in FY25, modestly above our estimate), the recent smorgasbord of catalysts could offer fewer rich pickings for investors in the near-term. For balance, we note that new management at Taylor & Francis means margin rebound is unlikely to be imminent, YE leverage of 1.3x makes sizeable buybacks less likely once the current programme ends in Q4 (particularly given a continuing desire as a market leader to consolidate fragmented industries), and greater exposure to exhibitions and corporate marketing budgets has arguably increased cyclicality again in the group. Even if peer commentary suggests tech marketing budgets are stabilising, we await clarity on China macro trends into 2024. Efficient repricing: We increase our forecasts for revenue and profit by 2-4% this year, but the pulled forward recovery plus the impact of FX moves and increased minorities mean our earnings are unchanged longer-term, and we trim our TP to 775p within our SOTP/DCF range. Informa now trades at 15x FY24E PE, or 11x EBITDA – by no means expensive, but offering a somewhat less obvious valuation mis-pricing than before. We downgrade to Hold.
Informa beats on H1 results With 32% group orgrev growth (vs. VA Consensus at 28%) Informa has topped expectations despite a slowdown in Tech marketing spending. In particular, the strength of the trade show industry coupled with the phasing of events in China drove a 64% orgrev performance for Informa Markets in H1 23, well ahead of consensus 50%. Group adj. operating profit came 21% ahead driven in particular by higher than expected adj. op. margins at Informa Markets (27.2% vs. 25.0%). Management expects to meet or beat guidance H1 results coupled with solid forward bookings of Informa events has management expecting it can deliver towards the upper end of the FY23 revenue and adjusted operating profit guidance. We have raised our EPS by 1% and expect consensus to raise its EPS23 forecasts by c4%. Informa to grow 5%+pa and deliver c.30% operating margins Management issued a clear mid-term outlook for the first time. It expects the group to grow 5%+ pa and deliver c30% adj. operating margins with Informa Markets margins likely to return above 30%. This outlook is in line with our forecasts and ahead of consensus, in our view. VA Consensus stood at 28.4% for FY25. Our mid-term EPS forecasts are broadly unchanged with higher adjusted operating profit forecasts, mitigated by higher minorities and tax rates. Reaffirm Outperform Aside from its exposure to Big Tech marketing spending (c.6% of group revs.) Informa is in strong shape, with Markets driving a faster than expected top-line and margin recovery, plus progressive top-line growth acceleration at TandF. The stock remains on c15x PE24 and offers over 6% FCF yield for a mid-term top-line growth outlook of 5%+. We reaffirm our Outperform rating and see the November trading update and possibly confirmation that the company is on track to beat the high end of its guidance as the next catalyst.
The markets cheered Informa’s better-than-expected H1 23 results, a near-doubling in the interim dividend and a positive more-detailed guidance update. Informa also announced two new targeted acquisitions for Informa Tech and Informa Markets at attractive multiples.
1H figures (to June) are strong due to China (more 1H weight but good performance), some event scheduling benefit, but overall, underlying strength everywhere. Also some M&A boost eg Winsight margin benefit on timing. Expect low single digit EPS upgrades with moves to top of guidance range. ADD
Powering on Informa have released impressive interim results today – revenue of £1521m (organic growth of 31.9%) and EBITA of £414m were both well ahead of consensus, as was EPS at 22.5p (consensus 17.3p). By division, the key Markets business grew 64%, with strong returning exhibitions demand in all regions, and Academic publishing saw growth accelerate to 3.3% (although the divisional CEO is set to step down after 6 years in the role). This profit growth / cash generation continues to fund further M&A, with Informa today announcing the acquisition of a major US healthcare exhibition, and other tech research assets – similarly, the group has completed £800m of its £1bn buyback program thus far. Confidence in the future On the outlook, the strong H1 performance & forward bookings mean management now expect FY performance at the top end of the previous guidance range (revenue £2.95-3.05bn, EBITA £750m-790m), with FY margin guidance raised (+400bps yoy). Lastly the company provide FY24/25 formal margin targets for the first time – targeting 28% in 2024 (INVe 27.6%) and 30% in 2025 (28.7%). Value remains The stock has been a strong performer in recent times, but it still trades at <16x CY24E earnings – a discount (albeit much more modest than previously) to RELX at c.20x. Cyclical risks remain for Informa, but with previous investments to drive portfolio quality very much bearing fruit, we believe the fundamental value remains higher than the current share price.
Informa^ (INF, Buy at 746p) - Interim results
Informa^ (INF, Buy at 715p) - Strong momentum drives upgrades
Updating figures for the positive AGM update/strong momentum/ upgraded guidance. FY23E adj FD EPS increases +4%. We remain positive on INF with events recovering strongly globally (including China) and a more exciting strategy to grow beyond events in broader digital services within verticals. Mult
Informa reports stronger-than-expected top-line growth Informa reported 24% organic revenue growth for the first 5 months of FY23, with Informa Markets showing 43.5% yoy orgrev growth and guided to accelerate in June, on the timing of Chinese events. Informa Tech was weaker than expected as it is facing choppy markets, with tech firms cutting down on lead generation and marketing spending. Other divisions were broadly in line. Management raises FY23 revenue and adj. op. profit guidance Given stronger-than-expected underlying operating trends at Informa Markets and the earlier-than-anticipated closing of the Tarsus deal (cGBP5m of extra adj. EBITA23e), plus the recent Winsight acquisition (cGBP16m adj. EBITA for FY23), management has raised its adj. EBITA guidance to a new range of GBP750-790m. At the mid-point, this implies a 7% underlying adj. EBITA guidance raise for FY23. New revenues are guided to GBP2.95-3.05bn (vs. GBP2.75-2.85bn before). Chinese revenues set to revert close to 2019 levels. Group revenues to exceed 2019 levels Management now expects group revenues to exceed 2019 level this year (vs. FY24 previously). In particular, the company has acknowledged the strong recovery in Chinese exhibitions. We now expect Informa Markets China revenues to reach 88% of its 2019 levels in 2023 and 106% next year. Raising EPS and TP Despite forex headwinds and weaker trends in Informa Tech, recent acquisitions (Winsight) coupled with the strong performance in Informa Markets leads us to raise our EPS23 and EPS24 by 9%. We raise our TP from 840p to 900p. We continue to believe consensus might be too conservative on the margin trajectory of Informa Markets. Outperform maintained Informa offers one of the strongest top-line growth trajectories in Media and Internet in FY23 and FY24 and trades on an attractive 14.5x PE24 and 6.7% FCF yield for a net debt to EBITDA24 ratio below 1x. We reaffirm our Outperform rating.
Informa issued this morning a trading update ahead of its AGM to signal an increase in its guidance for 2023. Revenues are sensibly revised upwards as well as adjusted operating profit, the stock is up 3% on the news.
AGM update is good/positive strong momentum across the business, especially B2B events. Forecasts under review: we expect consensus forecast upgrades of c. +5% in the middle of the new range of guidance, depending on previous inclusion of recent M&A, implying adj FD EPS of just over 40p vs our
Accelerating growth In its AGM trading statement today, Informa highlights its accelerating growth in revenues, profits and cashflows – the company has reported organic growth of 24.5% for the first five months of the year, with robust growth in Academic (3%, in line with consensus) and ongoing recovery in the key Markets division (+44%), with strong returning demand in China in particular as that market re-opens. FY guidance raised Underlying operating trends (including forward bookings), combined with the recent Winsight acquisition, means FY revenue guidance is raised £200m (7%) to £2.95-£3.05bn, with EBITA guidance increased 10% to £750-790m (INVe £710m) – management impressively highlights that revenues are now above pre-Covid levels, despite the disposal of the Informa Intelligence division since then. Lastly, Informa has now completed £785m of the planned £1bn share buyback program. More to go for Despite the recent strong run, the stock still trades at <14x cal FY25 EPS versus RELX at 19x – it is likely to remain more cyclical for the foreseeable future, but we believe the increasing quantum and resilience of growth warrants further re-rating.
Informa has acquired foodservice specialist Winsight for $380m in cash, strengthening its B2B portfolio in line with its growth plan. The combination of the two will create a new leader in this market. Informa is expected to benefit from earnings accretion in the first year of ownership, thus preserving its financial health.
Interesting bolt on cash acquisition of Winsight, a US B2B event and services operator in foodservices for an initial EV of $380m (plus an earn up of $20m). Forecasts – we increase FY23E EPS by +2% with FY24E at +3 allowing for the full year effect and synergies. Also, we note that the Tarsus acqui
Meeting Notes - May 04 2023
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Chegg profit warning In its quarterly results, US Educational content provider Chegg (Not Rated) yesterday warned on the impact on its business from ChatGPT - noting that since March it has seen a significant spike in student interest in it, which is having an impact on new customer growth rates (albeit noting retention rates remain strong given the value provided to existing students). Chegg has refrained from giving FY guidance as a result, and the shares nearly halved in early trading. Considering the UK impact Looking at the impact on the UK Media space, Pearson (Not Rated) shares fell c.15% yesterday afternoon, whilst RELX fell c.5%. Whilst the relative similarity of parts of Pearson to Chegg is something for others to discuss, in terms of RELX we have written about the competitive threat from new technology entrants in the past. We would note (and agree with) RELX management's regularly stated comments that their competitive moat comes from their proprietary, paywalled content that is not available for others (whether Bloomberg, Google, or ChatGPT) to publicly access, the importance of their offering to professionals (scientific researchers / doctors / lawyers etc) as distinct from school / college students, and the incremental job-specific analytical tools they provide. It’s worth noting too that RELX has typically been at the forefront at incorporating AI-based tools into its products. A question of multiples and forecasts More broadly however, we have also written that despite RELX' very many fundamental attractions, the valuation remains somewhat full (if fair) – even post falls it trades at c.19x CY25E earnings, relative to Informa at less than 14x. In the absence of overt obvious drivers of upgrades to consensus forecasts, we see better opportunities for upside elsewhere.
We have reworked our financial model to reflect Informa’s full year results and the acquisition of Tarsus. The result is a step up in both our adj. EPS and DPS expectations contributing to strong growth in both measures and strong cash generation. We are positive on INF’s fundamentals and our fair value estimate of 786p suggest c.18% upside potential. We therefore reiterate our BUY reccomendation.
A top pick in Media - TP raised to 840p (from 780p) Informa''s top-line growth forecast of 18% in FY23 looks supported by our latest Exhibition Monitor. We raise our TP to 840p, a level consistent with Charterhouse''s valuing of Informa shares in their portfolio resulting from the recent Tarsus sale. With 25% upside, Informa remains one of our Top Picks in Media. BNPPE Exhibition Monitor points to further upside Our proprietary exhibition tracker digs into 65+ Informa events, including over half of the group''s Top 50 brands. It suggests that post-Covid reopening in China is progressing at pace, offering scope for upside, while volumes at US shows are growing above expectations in Q1. We also believe forward bookings for H2 23 events are trending at the higher end of expectations. Our review of Tarsus''s event portfolio suggests Informa''s strong competitive positioning will improve even further. Deep-dive into Informa Tech leads us to reappraise its growth profile We conduct a deep-dive into Informa Tech (15% of group revenues), benchmarking vs peers such as Gartner, Forrester, TechTarget, Ziff Davis or ZoomInfo. We argue that following its restructuring, Omdia, Informa Tech''s key asset, is seeing improved operating trends and growing market share. Live B2B events such as Black Hat show stronger-than-expected forward booking growth. Lead generation and audience development offer an attractive growth opportunity. Informa Tech should weather the deteriorating training and advertising spending environment in the Tech industry. Valuation still attractive Informa currently offers a FCF yield of 5.5% and 6.4% for 23/24 and trades on a PE of 17.9x and 15.1x for 23/24. This is at the attractive end of the peer group, despite an underleveraged balance sheet and one of the strongest growth profiles in European Media. Market-relative multiples have derated, despite solid EPS revisions. Our underlying EPS increase is offset by currency. We are 3% ahead of...
Impressive momentum: The FY results last week showed the robust underlying operating performance of the Informa portfolio – Taylor & Francis continued its gradual acceleration, many exhibitions across the US & Middle East are now running ahead of 2019 levels and the China market continues to re-open (full activity expected in 2024). These factors gave management confidence to increase the buyback to £1bn. Separately, we believe the presentation was a valuable reminder of the growth opportunity being built with the IIRIS initiative, with early signs of the scope to monetise the 17m of first-party data contacts in its database. Always eventful: We have long expected further consolidation in the exhibition industry, and Informa’s acquisition of Tarsus for $940m (or 9.9x average FY23/24 EBITDA, post an impressive $20m of targeted synergies) provided clarity on the next step in this process. This is expected to deliver high single-digit accretion in FY25 (Tarsus’ positive biennial year) but we suspect there could be upside risk from Tarsus’ contribution and recognise the attractive geographic and sector fit. Overall we set our FY23E revenue and EBITA broadly in the middle of management’s guidance range in FY23E of £2750-2850m of revenue and £675-725m of EBITA – the deal leaves Informa’s pro-forma leverage at c.1x at YE23. Earnings momentum, then multiple expansion: On forecasts, we increase EPS by 6% in FY24E and 9% in FY25E. This leaves the stock trading at just 15x calendar FY24E earnings, and c.13x in FY25 – a significant discount to RELX at 21x / 19x respectively. We recognise the broader cyclical risks but, with positive earnings momentum and increasing portfolio quality, we see scope for this valuation discount to close at least somewhat.
Informa’s stock was up 3% yesterday, after the group released strong FY22 results, supported by all businesses and by the outlook, glimpsing a rosy future, with a return to pre-COVID levels.
FY22 results in line with pre-released numbers Informa FY22 revenues, adj. operating profit and FCF came respectively 1%, 3% and 8% ahead of VA consensus but broadly in line with pre-released figures. FCF was 6% higher than the pre-released number. Solid FY23 outlook Management painted a positive picture on forward bookings and issued a solid outlook for Informa Tech despite recent negative headlines from Big Tech. Adjusting for forex and the Tarsus acquisition Informa guided for GBP660-710m of stand-alone adj. EBIT when consensus stood at GBP670-675m for FY23. Balance sheet utilisation: higher share buyback and a big acquisition Informa ended the year net cash (before leases). Management raised its share buyback programme for FY23 from GBP225m to c GBP500m. It also announced the acquisition of Tarsus, an event organiser set to generate GBP175m of revenues on c25-30% EBITDA margin. Tarsus acquisition makes strategic sense and looks sensibly valued Informa is to acquire Tarsus in a cash and share deal valuing the company at s. Tarsus operates 160+ complimentary trade shows which will reinforce Informa''s global leadership in Healthcare, Beauty and Industrials in particular. The deal will produce cUSD20 of opex savings and is valued on 9.9 EV/EBITDA post synergies. Informa had tried to acquire Tarsus in 2019. Outperform maintained Informa is making solid strategic progress on its B2B Market access strategy. The exhibitions and events industry recovery is performing well with the Chinese reopening helping in 2023 and 2024. Informa Tech offers attractive growth potential. Despite the Tarsus acquisition, Informa will remain under levered (1x net debt to ebitda post deal). Valuation remains attractive. INF is a top pick in Media.
Follow-up post positive results meeting with good event momentum and strategic progress. Tarsus acquisition looks sensible/positive. FY23E EPS c. +4% on an underlying basis and c. +4% for Tarsus. ADD: remain positive on event fundamentals and strategic positioning, even with macro downturn, given p
FY figures are in line/better. Confident outlook/guidance for growth. Tarsus acquisition looks sensible/positive. Expect modest underlying forecast upgrade this year with Tarsus accretion on top. ADD: remain positive on event fundamentals and INF strategic positioning, even with macro downturn, giv
Delivering on the promise, once again: It was hardly surprising that RELX delivered impressively robust FY results recently, with revenue and EBITA ahead of consensus – management’s execution in targeting the long-term growth opportunity from delivering increasingly valuable tools to professional customers is hard to fault. The current strength of recovery in the exhibitions industry (helped by the lagging impact of price inflation) should be well understood by now given commentary from peers, and divergent underlying drivers within Risk should continue to support growth at existing levels. Looking to the future: Longer term, we think the results give confidence that RELX’ sustainable organic growth rate can reach the long-awaited 5% level even once exhibition revenues have normalised to pre-pandemic levels in FY25E onwards. Increasing provision of analytical tools in Legal, and electronic reference / database tools in STM, have driven these two divisions (together c.50% of group revenues) to 4-5% growth in FY22 and we expect this effect to continue. Organic growth of 5%, alongside modest margin expansion and a c.£800m pa buyback, should deliver 12% pa TSR. Priced for performance: On forecasts, we leave revenues and EBITA broadly unchanged, with underlying operational strength offset by FX and modestly higher tax / interest at the EPS level. We reflect the improving growth trajectory and the multiples of peers in our new SOTP-driven 2500p target price. RELX now trades at just under 21x CY24E PE, relative to Informa at just under 16x – we recognise the track record very much warrants a premium, but we believe this gap leaves limited scope for relative out-performance at this point.
Our proprietary tracking of exhibitor lists points to upside to consensus expectations. We expect a solid outlook on March 9th when Informa guides for FY23. Informa remains one of our top picks in Media and Internet. We reiterate our Outperform rating and 780p TP. Q1 23 trends show scope for upside on Informa Markets We reaffirm our Outperform rating on Informa as we explore Q1 23 trends in the global exhibition industry, as revealed by our proprietary tracking tool, the BNPPE Exhibition Monitor. 20% growth in exhibitor count Our own tracking of over 14,000 exhibitors registered to exhibit at Informa Markets Q1 23 points to 20% yoy growth. Arab Health, MME, TISE, IRE, MDM, MIBS, Pharmapack show double-digit volume growth. Even perennially weak MAGIC is up 9% on exhibitor volume for the February edition in Las Vegas. New launches such as Premiere Anaheim and Premiere Columbus will further add to volume and revenue growth. We believe this volume growth exceeds current consensus expectations. UFI Global Barometer points to upside in Asia and South America UFI, the exhibitions industry trade body, has recently published bullish expectations from industry executives. This survey of over 360 exhibition companies points to upside in India, South East Asia and South America. Concerns on digital disruption are quickly fading. We have raised our FY23 orgrev growth forecasts for Informa Markets and now expect 30% growth (vs. 25% before) suggesting upside on VA consensus'' 24%. EPS is barely changed, on lower forex and Associates. Solid outlook expected on March 9th - Informa remains one of our Top Picks We expect a solid outlook when Informa guides for FY23. We believe consensus might be under-estimating the strength of the adj. op. profit margin recovery at Informa Markets, where we stand 12% ahead of the Street. Our more cautious view on margin pressure at TandF and Informa Tech leaves us 3% ahead on EPS. While management is likely to use its balance sheet...
Today's news and views, plus announcements from: INF, MRO, SGE, AJB, HBR, PFD, WKP, 3IN, AEWU, ROO, KIE, APP, BOO, & HOTC.
INF HBR APP
Positive FY update. Strong finish to 2022 and entering 2023 with continued optimism. Guidance suggests c. +5% to FY22E EPS if nothing else changes on higher operating profit/margin. Remain positive given more focused strategy and live event return, including China into FY23. FY results 9 March. Mul
Informa is set to be the fastest growth company in our coverage next year We reaffirm our Outperform stance on Informa as we expect the stock to report the fastest 2023 organic revenue growth rate of all large cap Media and Internet stocks in our coverage universe. The normalisation of the exhibitions industry as well as increased investments in digital services and geographic expansion are likely to support this strong top-line growth performance next year. Proprietary tracking underpins bullish view on 2023 We have updated our proprietary tracking on Informa Markets exhibitor volumes and stand prices. We believe the data are supportive of our bullish stance as several large US shows have already exceeded their 2022 bookings months ahead of their openings. Investments in Saudi Arabia, Beauty and Cosmetics coupled with more aggressive stand price inflation further underpins our view. 2023 margins to surprise on the upside 2022 marked a faster top line recovery than expected. 2023 in our view is likely to mark a faster margin recovery than consensus currently has. Our work on industry gross margins and Informa Markets real estate consolidation leads us to argue that consensus will have to increase operating margins from 24%-25% towards our 27% forecasts for FY23. Taylor and Francis top line growth likely to accelerate We continue to expect TandF organic revenue growth to accelerate from 3% to 4% next year on a higher share of fast-growing Open Research revenues and new contracts, as gained in Australia and the US recently. Valuation is still attractive Our argument on operating margins sees us stand 3% ahead of VA consensus on EPS23. Informa offers the highest growth profile in Media and Internet and one of the most attractive valuations, on 5.4% FCF yield. We reaffirm our Outperform stance and see 2023 operating margin guidance as the next catalyst when the company reports in March.
We have gently upgraded our EPS expectations for Informa following this week’s encouraging trading update and believe it is well placed to capitalise on strong post-pandemic demand for B2B events. We estimate aggregate FY22F-FY24F EPS and DPS growth of 78% and 72%, respectively alongside strong cash generation and do not view this potential as adequately reflected in its valuation. BUY.
3Q figures/conference call this week highlighted good/positive trading ex China and confidence on growth despite macro pressures. FY22/23E EPS +3%/+1%. ADD: remain positive on event fundamentals and INF positioning, even with macro downturn given post C-19 recovery tailwinds, though China remains a
Informa raised its FY22e guidance on the back of a stronger-than-expected recovery in B2B Markets. More than 400 events have been held so far, compared to 250 in the same period last year. Events revenues (excluding China) are now tracking at c.85% of their FY19 levels.
Informa reports a strong 10-month trading update Informa reported 41% underlying revenue growth, driven by 65% growth in B2B Markets and 3% in Academic Markets. Extrapolating H2 consensus from Visible Alpha, we estimate market expectations were for 54% growth in B2B Markets and 3% for Academic Markets (BNPPE at 61% and 3%). This performance was driven by the stronger-than-expected recovery of the trade show industry in all markets except China. Guidance raised despite China cut In 2019, Informa has generated over GBP200m of revenues from Mainland China. Year to date, it has made only GBP10m in this market. Management no longer expects any additional meaningful revenues from China this year (vs. GBP80m previously). However, the strong performance in North America and other regions more than offsets China. Including acquisitions and disposals, management has raised its guidance to GBP490-505m of adj. Operating profit, a 4% increase at the mid-point. It also guided for over GBP400m of FCF, or 20% more than consensus current estimates, based on strong forward bookings into 2023. Solid momentum into 2023 Informa should continue to grow above its historical average next year as it benefits from further trade show industry normalisation, underpinning pricing trends and new product initiatives, while China offers some (Covid policy dependent) upside. We shift our Chinese recovery from FY22 to FY23 and cut EPS22 by 5% but lift EPS23 by 2% assuming a 50% recovery rate on China next year. Outperform maintained Despite accelerating wage inflation, we believe Informa''s top line recovery will drive further margin expansion next year. Exhibitions is late cyclical but the message on forward bookings is solid and increased investments in new sources of growth look supportive. Valuation remains attractive and we reaffirm our Outperform with easing of China zero-Covid policy as the next tentative catalyst.
STM investor teach-in Yesterday afternoon RELX held a short, but impressive, online investor teach by divisional management on their Scientific, Technical & Medical division, which represents c.34% of revenue / 40% of profit. On the underlying market, management noted the 4% long-term CAGR in science researchers / health professionals globally, their 7%/11% CAGR in articles published/submitted and the 25% CAGR seen in visits to RELX’s platforms since 2017. Open Access is now c.20% of journal revenues and is not causing revenue drag – management have previously been sanguine about the lack of financial risk from the recent White House memo, shifting all federally-funded US science research (8% of the global total) to an Open Access footprint by 2026 (more detail here). Widening the opportunity More broadly, it was highlighted that sales of database reference / analytical tools are now c.35% of the division, not far behind the 45% from journal sales to academia/ Demonstrations of AI-driven tools to help new drug manufacture, discover genetic links to disease and implement best practice by doctors in complex medical fields were a memorable reminder of the increasingly diverse range of funding sources for the division (funding bodies, academic institutions, drug manufacturers, hospitals, etc.). Valuation full but fair RELX trades at c.18x calendar FY24 PE currently. A premium to peers such as Informa is certainly warranted, in our view, given the continuing acceleration in its growth trajectory and the record of delivery (alongside having less short-term risk to profits than Informa from last minute cancellations of major Shanghai events in Q4). In the current market backdrop, however, opportunities for absolute upside may still be greater elsewhere.
14 - 18 November 2022
INF 4556 KNOS 284620 SFOR ESNT MRO MELR N91 VSVS VOD WKP BPT CMCX DOTD HILS SGE SNR CBG CTEC GRI HLMA ICG JDW KLR KIE MTO SPX SYNC TYMN BOY FSTA LIO ANHGY WINA
Growth accelerates RELX has reported YTD organic growth of 9% (albeit influenced by the rebounding Exhibitions division up 85%). Both Risk (+7%) and STM (+4%) continued during Q3 at the growth rates seen in H1 – with Risk’s Business Services arm seeing demand remain strong and the Insurance arm improving. The Legal division delivered an impressive acceleration to 5% YTD (4% in H1), with management citing the contribution of increasing provision of analytical tools to customers. Qualitative FY guidance by division remains unchanged, but management note that momentum remains strong across the group. Getting the memo Management are hosting a conference call at 8.30am – alongside discussion of current operating trends, we expect the focus of questions on two main areas: firstly, on the impact of recent sterling weakness on the balance sheet (as well as EBITA), given meaningful US$ floating rate debt, and secondly on management’s views around the potential impact (or lack thereof) of the recent White House memo, mandating that US federally funded scientific research will be made publicly available. This research is estimated to represent c.8% of global scientific research, and previously had to be made freely available 12 months after initial publication. We believe this should not be an issue in terms of US federal funds as a revenue source (being instead mandated towards paying for publication of articles), but with another 8% of global research not behind a paywall, it could contribute to a deflationary impact from Open Access on traditional subscription journal contracts. Valuation full but fair RELX currently trades at c.18x calendar FY24E PE, significantly above Informa at 12.5x – RELX’s track record certainly justifies a valuation premium, but we recognise that rising bond yields are likely to weigh on its fundamental valuation long-term, limiting upside somewhat. As highlighted in our recent note (‘Now to show what it can do’), we continue to prefer Informa given its exposure to the strong late cycle recovery in the exhibition industry, the scale of valuation discount and the scope for accretive M&A / further buybacks.
Focus: The reshaping of Informa’s portfolio to provide greater focus is now complete to a greater or lesser extent. The recent sale announcements mean the Intelligence division disposal process is at an end, with estimated pre-tax cash proceeds of >£2.1bn, and an impressive combined valuation of >30x FY21 EBITA. Equally, the acquisition of Industry Dive (at a reassuring c.11x EBITDA pre synergies) provides both significant strategic benefits, and a source of growth in and of itself. Taking these, an assumed eventual £1bn buyback (versus current £725m plan), and an extra £350m of acquisition spend in FY23E into account, leverage remains below 1x – giving scope for incremental acquisitions / cash returns next year. Demand strengthening: We recognise the risks to Event recovery from further lockdowns in China, but with signs that re-openings continue, we have increasing confidence in our assumption that the underlying events portfolio reaches 70% of FY19 levels in FY22E, and 85% in FY23E (helped by better pricing power). At the same time, investment this year at Taylor & Francis should pay off in further top-line acceleration / margin improvement over the medium-term. Growth in registered customers in the IIRIS database also continues robustly (now >12m), providing significant incremental revenue opportunities from the existing business. Re-rating to start: On forecasts, we increase EBITA & EPS by 13-18% this year and by 5% in FY23E (reflecting the final scope of M&A), whilst LT profits are trimmed modestly. Our TP increases to 725p reflecting the disposal process and valuations. Informa trades at a modest 13x calendar FY24E earnings – given the increasing quantum and quality of revenue growth the portfolio can deliver, we see this as far too cheap relative to peers, even before the scope for EPS upside from balance sheet deployment.
Federal research to be publicly available A memo from the White House Office of Science & Technology Policy last night announced that US federally funded scientific research will be made publicly available, as soon as possible (and no later than Dec 31st 2025). This research is estimated to represent c.8% of global scientific research published, and previously had to be made freely available 12 months after initial publication. Benefits and risks RELX shares are down 3% today, potentially reflecting concerns over the implications from this. We discussed the potential for this development in more detail in previous research (New decade, new story, 16th January 2020), but would note: this should not be an issue in terms of US federal funds as a revenue source, with federal research funds being instead mandated towards paying for the submission and publication of articles (accelerating penetration of the fast growing Open Access approach to payment that has actually accelerated revenue growth for RELX & Informa in recent times), but that with another 8% of global research not behind a paywall, there may well be some continuation of a deflationary impact from the rise of Open Access on traditional subscription journal contracts (the pay to read model) – albeit an impact that Open Access charging levels will no doubt take account of. Fair value Taking a step back, the overall impact on RELX of any changes is likely to be relatively minimal – we estimate scientific journal publishing is <15% of RELX group revenue (and <10% at Informa). RELX trades at a 20x CY24E PE, Informa at 12x.
Informa reported strong H1 results, with 48% organic revenue growth Informa had pre-released indicative numbers on July 19th. Its full set of numbers show the company is trading at the top end of management expectations with 48% organic revenue growth driving a 3% consensus beat on continuing revenues and EBITA. Management has reaffirmed its FY guidance and expects to deliver at the top end of its guidance. B2B Markets margin stronger and Academic Markets margin lower In H1 Informa Markets and Informa Tech adj. operating profit margin came ahead of expectations despite an aggressive hiring policy in Markets and start-up investments in Saudi Arabia. GAP II investments to expand Taylor and Francis Open Access volume capabilities and author services resulted in lower margins in Academic. Disposal of Maritime intelligence assets at attractive levels Informa has announced the disposal of 80% of its Maritime Intelligence business for GBP385m (@100%). It will retain a 20% stake. Management also decided to retain Informa Global Markets and Zephyr, two assets initially put up for sale in the Financial Intelligence segment. Informa has now completed its GAPII disposal programme and sold assets on an average of 28x EV/EBITDA21. Outperform maintained We have adjusted our model, mostly for recent MandA and forex but also lower adj. operating margins in Academic Publishing. This results in an EPS22 and EPS23 revision of respectively 9% and -2%. We continue to expect the stock to benefit from the normalisation of the Events industry in H2 22 and 2023. We argue that several company-specific drivers (China reopening, investments in Beauty and Saudi Arabia, pricing) are likely to outweigh any potential macro pressure in North America and Europe next year. On 11.9x EV/EBITA23 we argue the business recovery is not yet fully priced in. We maintain our Outperform rating and see some 23% upside on our 740p TP.
Even stronger H1 In pre-releasing H1 numbers in late July, Informa targeted revenue / EBITA of ‘above £1050m / £220m’ respectively, relative to the original consensus of £1029m / £209m – in the full results today, it reported revenue of £1096m (org growth 43.9%) and EBITA of £235m, meaningfully above the original expectations. Operationally, management note the 3% org growth in Academic publishing, that Events achieved >80% of the 2019 H1 revenue level, and the planned FY22 £30-40m of capex / £30m of opex in the GAPII investment program. Portfolio focus completed As stated previously, Informa re-instate dividends (at 3p in H1), and highlight a net cash position at the end of H1. In conjunction with the results, it also announced the disposal of the last part of its Intelligence division – selling its Maritime Intelligence business to Montagu for an implied £385m (keeping 20% stake). This means the division was sold for £2.5bn overall, at a combined 2021 multiple of 28x EBITDA. On the outlook, management re-iterate previous commentary that they expect to be at the upper end of the FY guidance range, and note that they have completed £346m of the current £725m buyback plan. Earnings momentum and cheap valuation The shares have been relatively strong post the pre-release of results, but the stock still trades at only 13x FY24E PE, versus RELX at 20x – too cheap, in our view, with the increasing portfolio quality & accretive M&A / further cash returns to come. With pricing power, cost control, earnings momentum and a relatively low multiple, we believe Informa offers a highly attractive set of characteristics in these markets.
Interim results robust and ahead As one would typically expect, RELX has today reported robust interim results, with revenue at £3969m and EBITA of £1239m both modestly ahead of consensus, leaving EPS of 47.2p, also c.3% ahead of consensus expectations. Leverage remains at 2.3x, with £342m deployed on 6 acquisitions and £300m of share buybacks completed, leaving just the remaining £200m in H2. Gradual acceleration By division, both STM and Legal stood out, with organic growth in both accelerating to 4% in H1. In STM, management highlight that it continued to see growth in article submissions despite the tough comparable, and strong demand for new content sets and software tools remains. Similarly, demand for analytical tools is underpinning growth in Legal, and new sales continue to show positive momentum. Exhibitions rebounded slightly faster than consensus expected, and Risk remained at 7% growth, with parts of Insurance improving during H1, helped by driving / claims activity. Momentum maintained On outlook, management note that momentum remains strong across the group in H2 and leave group headline guidance unchanged. The stock now trades at 20x CY24E PE – warranted in absolute terms given the track record of delivery, but relatively full in our view versus the likes of Informa at <13x.
Informa is up 5% after reporting better-than-expected preliminary H1 22 results and announcing a number of important developments this morning, including the acquisition of Industry Dive (US B2B Publisher) and the sale of EPFR (part of Informa Intelligence).
Today's news and views, plus announcements: INF, LIO, BAB, PCA, AWE, PDL, RQIH, & PEBB.
Informa Plc R&Q Insurance Holdings Ltd
1H update and strategic M&A
Demand for trade shows running ahead of expectations In its AGM trading update, management guided that it now expects to reach the higher end of its FY22 guidance as all segments are trading strongly. Demand for trade shows is stronger than expected. B2B Markets revenues are up over 90% for the first 5 months of the year driving the group underlying revenue growth at 40%+. Mainland China shows expected to run from Q3 onwards Management is pointing to the reopening of Mainland China as restrictions are lifted. It expects to run its first show in August and is now guiding for GBP120m+ of revenues from this country (in line with our forecasts). 3.5% org rev growth in Academic Markets Taylor and Francis is currently trading at +3.5% underlying revenue growth and is guided to be on track to reach 3% in FY22 on strong Open Research growth and high subscription renewal rates. Share buy-back increased to GBP725m Informa announce an increase in its share buy back programme from GBP300m to GBP725m in FY22. Management is targeting to return 50% of post tax disposal proceeds to shareholders. We believe that a special dividend is unlikely for FY22 and that an additional buy back in FY23 is likely following the disposal of Finance and Maritime Intelligence assets. EPS raised. Outperform maintained We have left our FY22 forecasts unchanged as we were already expecting a strong recovery in Informa Markets as per INFORMA: US likely to outweigh China and INFORMA: A show of strength. Higher share buy back assumptions drive our EPS revision. We continue to believe that the recovery in trade shows and acceleration of growth in Academic Markets is not fully priced in and reaffirm our Outperform stance.
While Informa’s stock is up this morning following a reassuring 5-month trading update, we are nevertheless concerned about the outcome of today’s AGM.
AGM Update net positive
Our updated tracking underpins our view that Informa Markets could surprise on the upside We have updated our proprietary BNPPE Exhibitions Monitor and argue that the last two months have seen solid progress in forward bookings at the key Informa Markets North American unit. Exhibitor volumes are now running at 80% of their 2019 base. Add in some price inflation and we conclude that management guidance of 75% looks conservative. Mainland China remains a key but manageable short-term headwind Given the ongoing health situation in China, Informa had to cancel some shows and postponed all its largest events to less favourable dates in 2022. Daily reported Covid cases are falling in China and Shanghai has seen some lifting of restrictions. Our industry contact suggests a 50/50 chance that Shanghai shows will run in Q4 22. Up to 5% of Informa group revenues are at risk. Forecast trimmed on China risk We have reduced our Mainland China revenues by close to 20% to account for the public health context. We have also adjusted our forecasts to reflect the earlier than expected closing of the pharma intelligence disposal and forex. EPS22 is trimmed by 2%. AGM update on June 16th seen as supportive Informa is to report its AGM trading update premarket on June 16th. We expect management to focus on the rapid recovery of its US events portfolio and see this as a positive catalyst. Outperform reaffirmed We reaffirm our Outperform rating. Informa Markets'' turnaround is progressing well and Mainland China looks like a manageable short-term risk. Taylor and Francis offers scope for a catch-up in Open Access to help drive a divisional top-line acceleration. With a PE24 of 13x we see less Covid recovery priced into the shares than for other travel-related shares and remain Outperform.
Today's news & views, plus company announcements from: INF, AML, CTEC, AVAP, & INL.
INF CTEC INL AVAP
How far and fast will a ball bounce? It''s hard to say when you don''t know if it''s made of rubber, concrete or something in between. That''s the problem at Informa: Covid dropped exhibitions to the floor, and while post-Covid is seeing them rise again, how much is left to go? Time for material analysis. Relaunching following a change of analyst, we slice into Informa to find out what it''s really made of. Our tracking tool shows that events are ahead of expectations, especially in the US. Long-term prospects are also good, given a more ''phygital'' model should help this market leader consolidate share. Meanwhile, our new proprietary Open Access Monitor uncovers a catch-up story at subsidiary Taylor and Francis. With the Exhibition bounce showing no signs of petering out, we forecast earnings to double by 2024. Outperform.
Today's news & views, plus announcements from INF, PHP, SEIT & FUTR.
INF PHP SEIT
Confirmation of new numbers We confirm our revised forecasts to capture the FY21A numbers and the amended guidance. Overall the net change is limited to a 2% upgrade to PBT/EPS this year and 3%/4% next year. Reflecting these estimate changes, and the better-than-expected disposal price for the Pharma element of the Informa Intelligence division, we increase our one-year target price from 610p to 650p, and maintain our Add recommendation. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 3-page note
Informa’s FY21A results detailed a transition year for the company but provided reassurance that its prospects are improving with the help of a proactive re-focusing on events and academic publishing. Our re-based estimates suggest strong medium-term EPS growth, robust cash generation and a return to dividend payments, although our fair value estimate of 580p suggests its share price represents a fair trade off between these attractions and the risks posed by current geo-political events. HOLD.
Growth coming through: Management’s confidence in the trajectory of recovery was demonstrated by the narrowing of the revenue guidance range towards a higher level (estimate £1970-£2070m ex Intelligence, dependent on the level of event activity in Mainland China), but was also illustrated more broadly. For example, in B2B Markets, a) the top 10 event brands to run YTD have achieved 85% of FY19 revenue levels, b) event launch activity has restarted, & c) forward booking activity should be sufficient to maintain working capital levels despite the impressive inflow in 2021 – we forecast Markets at c.70% of FY19 levels this year, reaching 100% in FY24E. The importance of data: More structurally, we believe the benefits of GAP II investment to expand the group’s ability to collect, manage and monetise its own first party data should not be under-estimated. The IIRIS platform built to achieve this will be fully in place across 4 of Informa’s main verticals in 2022, with a group target of reaching 14m known, permissioned & engaged contacts in the database by year-end (from 10m). This should generate significant incremental revenue over time from digital lead generation, in the same way as US-listed Techtarget has achieved. Growth at a reasonable price: Overall, we leave forecasts broadly unchanged, with the impact of lower tax and interest broadly offsetting lower Taylor & Francis margin assumptions. Our target price nudges up to 700p given a higher assumed Intelligence division disposal price (leaving the company with net cash by YE22E). Informa still trades at <13x CY24E earnings, a significant discount to peers like RELX at c.18x – we believe this offers scope for re-rating over time as evidence of the increasingly quality of Informa’s growth potential comes through. For us, Informa remains a key sector pick.
FY results in line with expectations Informa reported revenues of GPB1799m, up 6% organically and 8% on a reported basis. The growth was led by all divisions, with Markets up 7.7%, Connect 3.8%, Tech 13.9%, TandF 2.4% and Intelligence 6.5%. The group''s operating profit came in at GBP388m and was thus above the guidance of c.GBP375m. Group FCF generation was strong at GBP439m vs -GBP154m the prior year. Buyback raised and more to come At the CMD in December as part of its GAP II programme the group has guided to a GBP1bn return to shareholders on the back of various disposals in the near-term. At the FY, the group thus raised its buyback to GBP300m (from GPB100m previously announced). The group will communicate in June on how it plans to return the remaining cash. Management flagged that a buyback (as opposed to a special dividend) was the preferred option in their conversations with shareholders. Outlook reassuring as guidance range narrowed The group narrowed its FY22 revenue guidance to GBP2150m-2250m with an operating profit of GBP470-490m. This new guidance implies a slightly higher midpoint than the previous guidance and reflects a more detailed timeline for the remaining Intelligence assets, with Pharma to be completed by the end of Q2, Financial to stay on for 8 months in FY 22 and Maritime expected to be sold at YE. Regarding China, the group models a year with 6-7 months activity due to stricter Covid restrictions and has decided to run its international Hong Kong shows offshore. For now, Informa has not yet seen a drop-off in bookings on the back of the Ukraine war. Reiterate Outperform We update our model for FY21 and reflect management comments in our model. Our EPS estimates are rising slightly and so is our TP. We reiterate our Outperform as we see limited downside risk on the group''s recovery trajectory to 2019 levels.
Informa’s stock is up 2% after the group released satisfying FY21 results, supported by improving trends with progressive re-openings and easing of COVID-19 restrictions.
Informa^ (INF, Hold at 550p) - Full year results - a year of change
Prelims: reaffirming and refining Operating results were in line, with financing costs and tax lower, allowing for a good EPS beat. Guidance for FY22E – the year of Informa Intelligence disposal – is being refined but not fundamentally changed today. The share buyback will accelerate and the market should start contemplating what the company will actively do with the disposal proceeds. Buy, TP 610p. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
FY results as expected; markets outlook encouraging
Robust FY21 results At a headline level, Informa has reported FY results modestly ahead of consensus, with revenue of £1799m (in-line) driven by 6.1% underlying growth and EBITA of £388m, 3% ahead of our estimate. Informa also delivered FCF well ahead of our forecasts at £439m, and EPS of 16.7p (INVe 15.8p). On guidance, the company expects revenue of £2.15-2.25bn, and EBITA of £470-490m in FY22 – management note this reflects them re-confirming previous guidance from the Capital Markets Day in December, updated for the phased sale of the Intelligence division – we treat the Intelligence division as separate to continuing operations in forecasts (hence are below this guidance). Pulling the growth levers Within this, management highlight they expect improving growth in Taylor & Francis, ongoing investment in their IIRIS data initiative (to expand their contact database from 10m to 14m in 2022), and that they are seeing improving momentum in forward event bookings (for major events in H1, 76% of FY19). More broadly, they re-iterate GAP II targets of £200m incremental revenue by 2024 on back of £150m investment (£75m in 2022) and have completed the first £100m tranche of planned buyback (starting the next £200m now). Management lastly highlight that Russia/Belarus represented <0.1% of revenue in 2021. Growth at a reasonable price Informa now trades at c.12x FY24E PE, a significant discount to RELX (at 18x PE). RELX and US peers provide an aspirational target of where we believe Informa’s valuation should move towards, as the increasing quality and quantum of the growth potential is recognised – as a result, we believe Informa represents a clear example of ‘Growth at a reasonable price’ and that the current share price therefore represents an excellent entry point long-term.
Today's news & views, as well as announcements from INF, BAB, FXPO, and EQT
Informa’s stock rose as much as 7.5% yesterday, reaching its highest level since March 2020, after the company confirmed the sale of its Pharma Intelligence business for £1.9bn and the commencement of its share buy-back programme, in line with the GAP II strategy laid out at its CMD in December. The company also raised its FY21e guidance. A shareholder’s delight…
Sale of Pharma for £1.9bn Informa has today announced the agreement to sell Pharma Intelligence for £1.9bn. We estimate that this is c.30x -33x EBITDA – a great price. The remaining businesses could yield a further c.£700m - so in aggregate well ahead of our £2bn estimate for the whole division. In addition, the company has confirmed FY21E trading was in line with guidance, and that FY22E has started confidently. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
Capturing unrecognised value: Informa announced plans to dispose of its fast growing Intelligence division, with an expectation of a valuation above 16x EBITDA (feasible given peer / transaction multiples – we assume 16x FY23E EBITDA or c.£2bn) and a capital return of £1bn. We estimate this would leave leverage at just 0.5x even with £350m of M&A in 2023E – a sale multiple of 20x and leveraging to 1.5x could give a further 9% upside to long-term earnings. Creating the ‘new’ Informa: Alongside the disposal, Informa are deploying £150m over 3 years to accelerate growth in the GAP 2 scheme – the performance of Intelligence (the main focus of GAP 1) should provide confidence management will deliver returns on this. In the B2B segment, first party data from Informa’s 10m (20m by 2024) database of corporate contacts should provide a significant revenue and value creation opportunity, as it widens its addressable market by providing digital lead generation services to corporates. We highlight how the strategy, growth and value of listed equivalent TechTarget demonstrates what could be achieved. Separately, Informa’s growing Open Access footprint allows it to target new funding sources, to drive an acceleration to above 4% organic growth. These factors underpin management’s aspiration to deliver 5%+ normalised organic growth. Structurally mispriced: Short-term EPS falls by >20% with the sale of Intelligence, but increases by 3% in FY24E as related cash returns and acquisitions take effect – our revenue forecast in that year remains in the lower half of management’s guidance range. Informa now trades at c.12x FY24E PE, a discount to both Euromoney and RELX (at over 19x PE). RELX and US peers (at over 20x FY23 EBITDA) provide an aspirational target of where we believe Informa’s valuation should at least move towards, as the increasing quality and quantum of the growth potential is recognised.
Becoming a purer play on event recovery
Earlier this week we hosted Stephen Carter, CEO of Informa, for a virtual QandA session post the group''s CMD, hosted last week, where he outlined the GAP II programme and announced the disposal of the Intelligence assets. Below are some of the highlights of the session. Intelligence disposal Selling Intelligence now explained by: a) multiple quarters of better growth; b) end of the CY, which coincides with the peak of the subscription year giving great visibility; and c) a better sense of valuation given recent disposals. While growth/margins may be similar to already disposed assets, the differentiator of the remaining assets is unique proprietary data and analytics. INF suggested that since the announcement last week it had been in touch with multiple interested acquirers. Medium term growth and margin Management suggested that the combination of physical fully returning plus digital services capability will lead to a higher growth rate in the medium-term. However, it expects double-digit growth in the next two years in B2B markets with the growth thereafter depending on the development of its new revenue streams. Cash return Management opted for a combination of special dividend and buyback (vs only the latter) to return GBP1bn to shareholders. The exact mix has not yet been confirmed. The combination is explained by the scale of the return which could stretch over a long time period. Under current trading volumes the group would need 6-9m to complete a cGBP500m buyback. The group suggested a c30% pay-out ratio for the ordinary dividend. It underlined that under the large MandA scenario, which would target GBP2.6-3.3bn revenues by 2024, leverage should not exceed 2.5x. Reiterate Outperform We believe the risk/reward is attractive at Informa at this stage and expect the group to grow above historical trends in the medium term, helped by consolidation and new revenue streams.
More than a CMD Informa announced a fundamental structural change ahead of its CMD. It is to sell the majority of Informa Intelligence to focus on Academic Publishing and Events; £1bn will be returned to investors and the rest invested in a digital transformation of the remaining businesses. Selling high quality, faster growing assets does realise value, but is an expedient rather than first choice route. The process is dilutive (13% in FY22E), but we think this sale is logical in the context of the opportunity elsewhere in the group. The elimination of debt and a shift to FY23E data sees our target price reduce only modestly to 600p (from 610p). Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 15-page note
GAP II investments to lead to incremental revenues Earlier this week, Informa held a CMD where it outlined its Growth Acceleration plan II. The 3-year plan, which will cost GBP150m, is expected to generate GBP150m+ incremental revenues on the rebased 2019 revenues ex-Intelligence. The group guides for an extra cGBP700m revenue contribution through bolt-on MandA. Informa guides for cGBP100m MandA investment per year. Shareholder returns of GBP1bn As part of GAP II, the group has announced the disposal of its Intelligence assets. Since GAP I, the group has completely turned around these assets, which have now grown c6% organically from negative to low single digit over the last decade. The group expects to sell the assets at an EBITDA multiple of 16x EBITDA in 2022. We forecast a 19x EBITDA multiple for the forthcoming disposals. As a result of these disposals the group expects to return GBP1bn to shareholders, which we now reflect in our estimates, with 50% as buyback and 50% special dividend. A knowledgeable event leader GAP II is intended to fuel the growth in Academic through further investments in Open Research, which should drive the organic revenue growth of the division up to 4% (from 2%). Concurrently, the group expects to accelerate the roll-out of Smart Events, expand in Audience development (USD5-6bn TAM) and build a position in B2B Digital Demand Generation, a market with a USD3bn TAM. Valuation upside and estimates In this note, we go over our estimate changes on the back of the group''s CMD step by step. We reiterate Informa as Outperform and see 28% upside to the current share price. While we exclude Intelligence now from our valuation, we raise our Academic multiple from 12x to 16x to reflect the raised guidance, investment in the division and overall positive sentiment on data analytics as more verticals embrace them. We do not add planned bolt-on MandA, but this provides potential upside.
Informa’s stock price jumped yesterday after the company held a Capital Markets Day to unveil its 2021-24 Growth Acceleration Plan (‘GAP II’).
Trading continues to improve: The trading update yesterday in itself was encouraging – with FY21 group guidance re-iterated, upgraded growth guidance for the Intelligence division (peers trade at >20x FY23 EBITDA) and non-core assets divested for £275m. From an operating standpoint, confidence in the events recovery is growing (despite inevitable volatility by market) with some events reaching 2019 levels and strong rebooking trends underpinning upgraded FCF guidance. We continue to assume Markets reaches 70% of 2019 revenue in FY22E, and 100% in FY24E. Investing in the future: With recovery more firmly established, management are setting out their new ‘GAP 2’ strategic program at the CMD on December 7. This will be focused on expanding their addressable audience, facilitating year-round customer interaction in events (a marketplace model), and utilising/monetising data better for B2B lead generation (similar to Techtarget (N/R), trading at 24x FY23 EBITDA). We now incorporate £150m of investment to achieve this, spread over 3 years, and split 70/30 between capex & opex. We conservatively assume no incremental related growth acceleration. Scope for multiple expansion: We nudge up revenue forecasts mid-term, but cut EBITA c.7-8% from FY22E onwards - reflecting the impact of incremental GAP investment and the announced divestment, partially offset by upgrades to underlying growth assumptions and recent FX moves – driving the trimming of our target price. Despite this, looking out to normalised earnings in FY24E, Informa still trades at <12x PE, a notable discount to the likes of RELX at 20x. With extra investment to further increase revenue quality now factored in, we see scope for significant multiple expansion as the benefits of investment start to be seen and confidence in recovery builds.
Good subs, good cash, uneven events Yesterday’s statement emphasised the company’s strengths: the accelerating subscription base in Informa intelligence, strong cash generation and falling debt. Yet we still trim outer year forecasts as the recovery trajectory stutters in events. China, for example, has seen revived localised Covid restrictions, and Northern Europe appears to be following suit. However, despite this, EPS recovery is still material and the rating modest. For the shares to break out of the current range, a more predictable recovery path needs to be shown at the aggregate events revenue. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 3-page note
Ten-month trading update sees Intelligence guidance upgrade Intelligence over the first 10m posted 6% organic revenue growth, another sign that the group post multiple disposals has turned around the business, which historically grew more around the low single digit range. Today, the division, which consists of Clinical Trials, Vessel Tracking and International Fund and Income Flows businesses, is guided to grow c6% org. in 2021 from 4.5% prev. This growth trend is expected to hold in 2022 as well. We note the particularly attractive multiple of 16x EBITDA at which the group disposed Barbour ABI, Asset Intelligence and Barbour EHS. FCF reassures and FY revenue and EBITA guidance reiterated Along with Intelligence, the group raised its FY FCF guidance to GBP325m (from GBP300m) and suggested its cash flow has been positive every month so far in 2021. We also note this guidance is pre-disposals, for which the group is expected to make GBP275m. We believe this is driven by the group''s subscription businesses as well as the rebooking momentum which is ''improving (...) into 2022''. Finally, the group reiterated its Academic guidance of 2% underlying growth for the FY vs 10m at 2.5%. The group revenues were reiterated at c.GBP1.8bn, with an op profit of c.GBP375 for the FY conditional on two major China events happening as planned for December. Downgrades due to events Cross-divisional Events'' organic revenues rose by +20% between April and YE and c.7% across the FY. This is partially explained by different base effects. All in all, we keep our Event revenues for 2021 unchanged but take a more cautious view on next year''s recovery given the recent China newsflow. All in all, we now see Markets returning to pre-covid revenues in 2024 vs 2023 previously. Reiterate Outperform with TP offering 28% upside We reflect the FY21 EBITA guidance in estimates. We take a more cautious view on the Event recovery, essentially delaying it a year. We adjust for...
Informa issued an encouraging trading update for the 10 months to end-October and said it was on track to deliver its FY21e targets, as concrete signs of a recovery in the events market now support the continued strength in the subscriptions activities. The long-awaited return of events in Europe has finally arrived.
FY21E forecasts reconfirmed; good debt reduction Informa has reconfirmed current year guidance. Subscription growth in Informa Intelligence is a standout figure. But divestments, investment and a still variable events environment are likely to impact the pace of FY22E recovery. Small outer year downgrades seem likely this morning. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
Robust trading update In its 10 month trading update today, Informa notes that trading at a group level continues to improve yoy, with FY21 guidance of revenue at c.£1.8bn / EBITA c.£375m re-iterated. In events, Informa has run 250 physical events across North America, China, Middle East & Europe, and notes it has seen a steady increase in participation / revenue performance – with some events exceeding 2019 levels, and an average achieved of >50% of 2019, as well as improving rebooking momentum into 2022. We currently assume the main Markets division reaches 70% of 2019 in FY22E, 85% in FY23E and 103% in FY24E. Impressive subscription strength Elsewhere, in the subscription businesses, Informa Intelligence has seen 6% organic growth thus far, and so management raise FY divisional growth guidance to 6%, from 4.5%+, and expect 6%+ org growth in the division next year (INVe 5%). The Taylor & Francis academic publishing business grew 2.5% for the 10 months (INVe FY21 2.0%). In terms of cash-flow & the balance sheet, management note the business is tracking well ahead of expectations for cash generation, raising FCF guidance to £325m, and separately announce the sale of Barbour ABI & Asset Intelligence (previously both under review) for proceeds of £275m, an average multiple of 16x EBITDA. Higher quality revenues to attract a higher multiple Informa is holding a CMD on Dec 7 to further address the planned investments / aspirations for ‘GAP 2’, its new strategic program - this aims (in events) to expand its addressable audience and facilitate year-round interaction with customers (shifting towards a marketplace model). The success of GAP 1 focused on the Intelligence division should provide confidence in management’s ability to deliver returns on new investments. Informa currently trades at 14x CY23E earnings, relative to RELX at 22x – as discussed previously, with a shift to higher quality revenue growth underway, we think scope for re-rating exists over time.
Every now and then Informa is involved in MandA speculation. Taylor and Francis has most often been discussed as a potential disposal. However, what would happen if the group were to be broken up entirely? We explore a blue-sky valuation scenario, potential acquisition candidates and divisional valuation ranges. This analysis is supportive of our Outperform rating. Blue-sky SOTP points to c.60% upside Our blue-sky valuation scenario includes the top end of the valuation ranges we have identified for the various divisions. Combined we see potential for c.60% upside to c.840p. However, with the future of events being clouded, a break-up might not be imminent. Exploring value by division We highlight the value for each of Informa''s divisions. We explore potential buyers, synergy targets and valuation ranges. In a break-up we see the most upside at Connect and Intelligence. LBO offers downside protection Our LBO model suggests an acquisition of Informa could comfortably be financed at the current share price. This should offer investors downside protection. Model available at request, full LBO details in the note. Events: the worst seems behind us We update our proprietary Informa Show tracker and the US Event employee database tracker. Overall, industry conversations, trade press and KPIs are all encouraging. We host the US Event''s pure-play Emerald Inc. on 20 September, please reach out if you would like to attend. Fundamental view intact: reiterate Outperform Whilst MandA speculation may help INF, our Outperform is based on a positive fundamental view of the company, underpinned by its leading position in Events where we see scope to grow above historical trends. Our unchanged 725p TP is based on 50/50 DCF (705p) / SOTP (745p).
Informa’s interim results detailed another period during which COVID-19 restrictions had a profound impact on its Exhibitions business but flagged solid trading elsewhere and struck a more optimistic note on the potential for recovery through FY22F and beyond. We have reviewed our forecasts and although we anticipate a strong bounce back in the group’s financial performance once COVID-19 is definitively in abeyance, our fair value assessment of 527p suggests that this potential is reflected in its stock valuation for now.
Turning a corner: Informa’s results provided reassuring evidence of its fundamental attractions – the subscription businesses of Taylor & Francis, and Informa Intelligence both saw upgrades to FY divisional guidance, cash generation across the group was stronger than expected, and management commentary on recent US business air travel / China exhibition rebooking trends should build confidence on event revenues returning robustly. We continue to forecast the Markets division at 70% of 2019 revenues in FY22E, 85% in FY23E and 103% in FY24E – an assumption of only 80% of 2019 in FY24 (with a 15% margin) is required to shift our DCF to the current share price. Déjà vu: Informa separately announced a ‘Growth Acceleration Plan (GAP) II’, once again with the aim of furthering its specialisation in, and provision of digital services to, particular industries. This is being done across the group, but in events it should allow the company to expand its addressable audience and facilitate year round interaction with customers (shifting towards a marketplace model), helping grow its revenue opportunity and make revenues more resilient. We expect more detail on the costs and related revenue growth benefits at the Capital Markets Day on Dec 7. Long-term value: In terms of forecasts, we cut FY21E EBITA 7% in-line with guidance, and although FY22E revenues remain broadly flat, we cut EBITA by 10% to reflect likely short-term investments under the new ‘GAP II’ programme to drive higher future growth. We also introduce new FY24E forecasts, with events finally moving past 2019 levels again – these underpin our DCF valuation, and we leave our target price unchanged. Informa now trades at <14x FY23E earnings, and <11x normalised FY24E earnings – with a shift to higher-quality revenue growth underway, we think this is fundamentally mis-priced.
H1 surprised on the upside H1 group revenues came in at GBP689m (-7.5% org) with adjusted operating profit at GBP69m, beating estimates by over 20%. Markets revenues, at GBP188m, and also Tech and Intelligence at GBP58m and GBP162m respectively, surprised on the upside. The strong performance of subscription renewals led to a high FCF of GBP134m (vs GBP71m the previous year) which consequently lowered the net debt to GBP1.9bn. Other Event snippets Management underlined the upbeat forward bookings and low rebate requests across its Event portfolio, which it expects to further rise as companies raise their budgets again with the pandemic coming to an end. Also, increased flexibility around deposits helps. At this stage, the group has underlined that the growth is volume-led (across the divisions). Overall, management seems happy with regard to the Tech and Connect event portfolios but expects a reduction in number of events in Markets to c85% of the level in 2019, which we believe could be helpful for the mid-term margin. Guidance raised The group guided to cGBP1.8bn group revenues (vs GBP1.7bn previously) with Event revenues at cGBP900m for the FY helped by more face-to-face attendance than initially anticipated. In terms of operating profit, the guidance is for GBP375m. Intelligence is expected to grow 4.5% organically in the year and TandF should rise by c2% organically. For next year, management suggested that a 65-80% revenue level of 2019 seemed fair. While GAP II details will be disclosed at the CMD in December, management indicated a capex level of cGBP100m over the next three years. Reiterate Outperform We update our model for H1, FX and make minor estimate changes. In Connect we deconsolidate the disposal of Barbour EHS and we slightly raise our Events estimates for FY21. As a consequence, our EPS rises by 2% in FY22 leading to a very small TP upgrade as well.
Informa raised its FY21e guidance on the back of better-than-expected H1 21 results, as the pace of physical events returning continues.
Interims – GAP2 Interim results were better than forecast, and full year guidance for revenue firming around a higher number. We leave forecasts unchanged. Recovery will be multi-year, supported by GAP2 with an emphasis on Digital services to support and reflect the new post-pandemic world. The key item today that speaks most to the recovery is the strong FCF number delivered in the first half, better cash and better forward orders support the recovery potential. Add, TP 610p. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 2-page note
Interims
Underlying trends in H1 encouraging RELX has today reported H1 results that were very modestly ahead of our expectations at a headline level, with revenue at £3394m (INVe £3380m) and EBITA of £1023m (INVe £998m). It has also reported EPS of 40.0p and leverage is at 2.8x, hence management note that the buyback will continue to remain on pause in 2021. By division, Risk accelerated to 10% organic growth, with STM at 4% and Legal at 3% - all ahead of expectations (albeit they note the easy comps from disruption last year, particularly in print), with the revenue decline / operating profit loss for Exhibitions in-line with consensus. Generating value for customers Management note that ‘almost all’ segments have returned to the improving trajectory that they were seeing in early 2020, helped by their ongoing focus on developing sophisticated analytical tools for their customer base. Overall on the outlook, management note that based on the improved performance of non-events businesses in H1, they expect full year underlying growth rates in revenue / EBITA to be slightly above historical trends. Valuation full, but fair We have never doubted the fundamental attractions of the RELX business, or its resilient growth drivers, but we believe the valuation largely reflects these factors, with the stock trading at c.20x CY23E EPS, relative to the likes of Informa at 12x. We hence remain at Hold.
First half thoughts and downgrade The slower pace of event recovery in the first half, resulting from the rise of Covid variants and the policy decisions on vaccination, suggest that expecting a return to profit from events in 1H is too optimistic. Below we set out our first half expectations – and detail the reduced full year forecasts (-15%). All this notwithstanding we leave our TP unchanged at 610p and retain our Add recommendation. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
First half thoughts and downgrade The slower pace of event recovery in the first half, resulting from the rise of Covid variants and the policy decisions on vaccination suggest that expecting a return to profit from events in 1H is too optimistic. Below we set out our first half expectations – and detail the reduced full year forecasts (-15%). However, outer years do not change. All this notwithstanding we leave our TP unchanged at 610p and retain our Add recommendation. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
2021 Event year as expected - under pressure We cut our FY21 estimates for Informa, ahead of Q2 results on July 29. While we still expect shows to ramp up in H2, particularly in the US (c1/4 of INF mkt revs) and the Middle East, the latest Delta strain of Covid underpins our more cautious stance on the FY. Consequently, we expect fairs to see lower attendance levels on the exhibition and visitor side, translating to less profits for the FY. With the event schedule expected to take its pre-pandemic course in 2022 and the vaccine rollout having progressed further, we remain confident of an accelerating 2022 recovery. We also adjust for FX. Exhibitions will be back The consistently low rebates, the lack of sales generated by SMEs through digital fairs and the historical resilience of the industry are among the factors underpinning our view that events will return mid-term to pre-pandemic levels. More importantly, we believe consensus is too conservative on the margin trajectory and that the industry will exit the crisis with structurally higher margins than before, as highlighted here EUROPEAN ADVERTISING and EVENTS: Off we go. 2021 Event recovery mixed and market dependent Our proprietary Event tracker for Informa suggests that in the Middle East and North America more new physical shows had been launched than cancelled. Latam is marked by fairs pushed into late Q3/Q4. Europe is the market that saw the most shows converted from physical to digital. Of the shows scheduled to take place between June and December, 50% are due to take place in Asia with the rest spread over the world. Reiterate Outperform, minor TP change We reiterate our Outperform, which is supported by our fundamentally positive view about events. Furthermore, we expect the exhibition sector to return with a leaner cost structure, translating to higher margins. Our TP falls a little to 717p (from 719p) on the back of our change in estimates.
M&A: An indicator of confidence amongst B2B companies Within the media sector, the B2B stocks – with their exposure to the highly disrupted event income – have been most heavily impacted by the pandemic. The share prices are still governed by investors’ perception of the pace of recovery; however, we see more confidence generally from management teams, evidenced not only by solid statements on trading but also the rising willingness to contemplate portfolio management. In this short note we discuss the range and type of deals we expect, and conclude they are a good forward indicator of rising confidence. malcolm.morgan@peelhunt.com, jessica.pok@peelhunt.com 2-page note
INF ERM AIAPF
AGM update – forecasts unchanged Forecasts should remain unchanged today as the company reaffirms its commitment to at least £1.7bn of revenue. Subscription elements are stronger perhaps, and China events in some cases returning to pre-Covid levels. Overall the tone seems gently better - the company notes increasing confidence in the 2022-24 growth outlook for the group - and we leave our forecasts and recommendation unhanged today. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
Trading update
A new business model: We understand the focus on short-term re-opening, and US vaccine roll-out progress (c.40% of division) will support returning events activity (alongside other examples, such as CPhI being recently permitted to run in Italy in H2). However two factors are of greater importance to the fundamental value of the business: a) resilient customer appetite (with some China events already running ahead of 2019 levels, and encouraging refund/forward booking trends generally), and b) the scope for hybrid events & associated online marketplaces to generate incremental revenues / create a higher quality business model. We forecast Markets at c.50% of 2019 revenues in 2021E, 70% in 2022E and 85% in 2023E – leaving scope for upside. Growing resilience: Elsewhere, the subscription businesses of Informa Intelligence / Taylor & Francis will still be c.40% of group revenues in 2022, and the better than expected growth trajectory in 2021 for both reflects previous product / technology investments generating returns, and the recent acquisition to bolster the financial arm of the Intelligence division should help continue this process. We would note peers like IHS Markit & Gartner currently trade (on consensus) at 20x 2023 EBITDA, but Informa Intelligence in particular is not fully appreciated by investors in our view. Cyclical & structural upside: Revenues remain broadly unchanged short-term, helped by the Novantas deal, but we nudge up 2023E by 2%, and earnings increase 3% in this year, driving our target price increase. Informa currently trades at c.13x FY23E EPS, a significant discount to RELX at c.18x. Informa remains one of our preferred larger cap Media names – with scope to benefit from both cyclical recovery & structural shifts in events, supported by ongoing acceleration in growth in its data-focused subscription businesses.
FY21F will be a transition year for Informa as the global events industry looks to recover from COVID-19 but we see good scope for a strong bounce back thereafter accompanied by attractive growth from the group’s other areas of operation. We retain our HOLD recommendation pending clearer evidence that the pandemic is in abeyance but will monitor developments carefully with a view to reverting to a more positive stance.
New numbers post results and Novantas deal We update our forecasts post the prelims. We indicated no material changes on the day; however, we include a small tax adjustment (ETR +2%) and the impact of the Novantas deal, and also issue FY23E forecasts for the first time. We increase our target price by 10p to 610p and retain our Add recommendation. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 4-page note
2020 as expected; 2021 event uncertainty prevails
Informa confirmed its FY20 estimates, reporting in line figures. Although the Events activities (2/3rds of the business) have been significantly hurt by the pandemic, the group’s financial position is better than guided in September. The group has committed to delivering at least £1.7bn of revenues in FY21e and to remain cash-flow positive throughout the year. The extent to which revenues surpass this baseline will depend on the recovery of events ex-Mainland China. Minor downgrades expected to our forecasts.
Prelims: FY21E forecasts unchanged The prelims today were largely as expected, with small beats on profit and debt. The outlook commentary was strong for the subscription businesses, but still speaks of uncertainly for events. FY21E is now seen as a transition year. We leave our FY21E forecasts unchanged this morning. We look to the interim results to supply more evidence of building confidence in the event recovery, and reiterate our Add and 600p TP. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
Emerging stronger than before In their FY results today, Informa have reported FY revenues of £1661m, and EBITA of £268m, both broadly in-line with consensus. By division, the subscription businesses of Informa Intelligence and Taylor & Francis delivered impressively robust results, with both Markets and Connect slightly below our estimates. Management note the significant actions taken during 2020, with >£600m of cost savings made, and the balance sheet now has >£1bn of liquidity with all financial covenants removed. 2021 – a year of transition On the outlook, management note that Informa has generated positive cash-flow in Q1 and that the robust performance of the subscription side of the business has continued, targeting positive growth at Taylor & Francis and 4%+ organic growth at Informa Intelligence in 2021 (both ahead of consensus forecasts). They re-iterate previous guidance that they expect to generate a baseline of £1.7bn of revenue, before the contribution of physical events outside mainland China. Structural strength More structurally, on exhibitions, management note their belief that demand for event platforms remains in place, having run 45 events with 1.2m attendees since last June in mainland China. Six of these events saw revenues inline or ahead of 2019 levels, and 65% of events revenue is typically generated in China and North America, where re-opening continues on a state by state basis. They also note that Informa has generated £100m of revenue from virtual/hybrid events already, and their recent deals with firms like Swapcard & Totem to facilitate these could help structurally shift the business towards more resilient, year round, marketplace models. Informa currently trades at c.14x CY23E EPS – with activity returning and the portfolio quality being upgraded, we see scope for further-rerating.
Orlando feedback and sterling strength Prelims will be a month later than usual in late April this year. Ahead of that opportunity to update forecasts we adjust for the recent sterling strength, against the dollar in particular: we previously forecast $1.35/£, but it seems to have steadied 4c ahead of this. At its most recent results, INF indicated that a 1c move in the dollar/sterling exchange rate equates to £11.2m in revenue and £6.0m in EBIT. We reiterate our Add and 600p TP. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
MAGIC Pop-Up Orlando – Live in February Little fuss is being made by Informa about a small event in Orlando. However, we believe it may have more significance than first thought. The MAGIC Pop-Up Orlando event will run live in February and will showcase a wide range of Covid-19 safety protocols. We expect the evidence drawn from this show to be instrumental in making a case for opening up the US event marketplace this year. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
Confirming new numbers Post the recent trading update we confirm our revised forecasts. New variants of Covid add pressure to the timing of the reopening of Western markets; nonetheless, the company has a strong subscription base, which alongside its exposure to the Asian trade show markets defines the scale of the current cost base. As a consequence, the company is turning cash positive this quarter. We upgrade our TP from 550p to 600p. Add. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com 4-page note
Informa jhas ust confirmed the group’s FY20 revenues would be in line with its last guidance (£1.65-1.68bn versus AV’s £1.7bn), thanks to the sound subscription businesses’ performance. Consolidated adjusted OP nonetheless is expected to be £250-270m, which is below our £330m forecast. Still mixed FY21e indications with “return expected for physical events, rather than full rebound and recovery”. We will make a downward adjustment to our FY20 earnings as we had expected a stronger adjusted OP. We intend to reiterate a cautious view on the stock.
Year-end trading update Clear guidance on revenue and operating profit for 2020 will limit the suspense as we wait until April for prelims. The shape of the year gone offers few surprises with subscription data and knowledge products trading well, but with events severely impacted. Looking into 2021 the reopening of events markets is still planned for late spring, but 90% of non-Chinese events will happen in H2. We leave forecasts unchanged for FY21. Risks remain but active management of events schedule for the moment keeps forecasts realistic. Malcolm.Morgan@peelhunt.com, Jessica.Pok@peelhunt.com
No major surprise on trading, HOLD on valuation
Event horizon: The exhibitions division – as with peers – continues to dominate the headlines for RELX. In the short-term, the expected revenues and loss for 2020 were both worse than consensus assumed, but we actually believe there are some encouraging signs for the business going into 2021. Management highlighted that events are now running or scheduled across several markets, with encouraging levels of customer participation / revenue generation – they aim to run 90% of a typical annual event calendar next year. In addition, restructuring of the indirect cost base should allow a robust return of profitability even on a lower revenue base (we now assume a 30% decline versus FY19, and a 20% EBITA margin, based on £75m of cost savings). Subscription resilience, thus far: Elsewhere, the trajectory of growth into 2021 was broadly reassuring overall in our view – at this point. Although Risk might have been expected to see accelerating growth in Q3, the dampening effect of lower new subscription sales earlier in 2020 should only be temporary. In Science, management recognise the current pressures on academic institutions and the need to help them address these, but with multi-year contracts in place and increasing sales of analytical tools & software, the effect of this on overall divisional revenues should be relatively modest in any one year. In Legal, growth has been sustained thus far, but we wait to see whether US lawyer headcount declines feed through into revenues next year. Better opportunities elsewhere: We cut FY20E EPS by 8%, but leave longer-term estimates broadly unchanged. In the near-term, we believe drivers of outperformance could be hard to come by – sterling strength with a Brexit deal could weigh on earnings, and the smaller exhibitions exposure relative to Informa (plus related valuation gap, with Informa at 12x FY22E EPS) could lead to RELX underperforming peers should Covid concerns ease.
Finding a floor: Informa’s new FY20 revenue guidance of £1.7bn is now a baseline floor for the group without any physical exhibitions running outside of mainland China (where operating capability and activity has returned, with events running at 80-90% of normalised revenues). At a more granular level, the subscription revenues of Taylor & Francis / Informa Intelligence continue to prove robust, monetisation of virtual events is accelerating and despite the crisis, there are some very early green shoots in exhibitions (Japanese market re-opening, government support in Germany / Australia etc). With £300-400m of events shifted later in 2021 (meaningful activity starting late Spring), we now assume Markets reaches 70% of FY19 in 2021E (and 85% in 2022E) – based on c.50% of normalised North America / EMEA physical events revenue. Putting cash concerns to bed: Management are implementing further plans to ensure the business emerges robustly from the crisis regardless of the pace of event re-starting – from an operational standpoint, targeting £600m of cost savings by YE (£200m indirect) to reach a cash-flow positive position by January, and noting these savings could increase if necessary. With a new bond issue adding to the £2.8bn of liquidity at the end of June (and low levels of customer refund requests), Informa will pay down the £1.1bn US private placement if a suitable waiver is not provided for the one covenant it has. Risk-reward skewed to the upside: We cut revenue/PBT by 8%/27% in FY20E, by 6%/14% in FY21E and profits by a more modest 5% long-term. The stock trades on 10x FY22E PE, with an 11% FCF yield in that year – as consensus estimates potentially start to trough, confidence in the basis of the depressed valuation should increase. This should allow investors to shift their focus to the fundamental value & scope for re-rating as demand, eventually, restarts.
Informa’s H1 performance was dominated by the profound industry-wide impact of COVID-19 on physical events, resulting in a sharp revenue and margin hit. The company has also been obliged to extend its postponement programme although other areas are performing well, and decisive and timely action should mean that it is well-placed to weather the storm financially, even if no physical events are held in FY21F. We remain cautious around this critical performance driver and based on our revised forecasts estimate a fair value target of 373p – suggesting that its stock remains in HOLD territory.
H1 results ahead of Covid-impacted expectations Informa reported H1 group revenues of GBP814m, down 26% organically and adjusted operating profit of GBP119m, down 54% but beating Covid-impacted expectations. Within the mix, Informa Markets'' revenues fell by 45%, Connect by 43% and Tech by 7%, whilst Business Intelligence (+1.8%) and Taylor and Francis (-0.7%) resisted relatively well. Outlook - GBP1.7bn revs for 2020 with recovery underpinned by China Informa narrowed its revenue guidance to cGBP1.7bn for the FY, in line with consensus, although we were above this level. The guidance is underpinned by a return of physical events in China, virtual events and digital services revenue contribution and continued resistance of Intelligence and Academic. Informa also announced GBP100m in incremental cost savings, suggesting it will now save GBP600m on a FY basis. For 2021, it suggests GBP1.7bn as the new revenue baseline under the assumption of the Postponement Programme that key 2021 events will be moved to a later date in the year. The group also expects its indirect cost saving target to be applied to 2021. Cash generative from Jan 2021 onwards The combination of better cost savings and effective cash management suggests the group will achieve a positive monthly cash flow position by January 2021, even if it only runs Mainland China physical events until then. Informa also proposed the issuance of GBP500m of debt, extending maturities up to 2023 and giving the option to repay the US PP notes if needed. We cut estimates but reiterate Outperform We cut our Events estimates significantly, across Markets, Connect and Tech. Our Academic and Intelligence expectations remain broadly unchanged. Despite the estimate cuts (50% in 2021), we reiterate our Outperform which is underpinned by the sustained appeal of face-to-face. The share price performance has reflected the continuing estimate cuts but we believe Informa is well positioned to drive the...
As expected, Informa’s H1 20 were badly hurt by the pandemic’s impact on physical events, although consolidated revenues (-£593m to £814m) and adjusted OP (-73%; £118.6m) were above street estimates. Non-cash impairments/exceptional costs also hurt, leading to a statutory pre-tax loss. The COVID-19 Action Plan is being pursued and the postponement plan is now due to last until mid/late Spring 2021. Costs savings raised to > £600m savings by year-end (versus £500m). Further cuts expected to our earnings and target price.
Structural resilience of demand: We realistically believe meaningful exhibition activity only returns in Asia (primarily China) in 2020, and so, whilst the group revenue target this year is likely to fall, we believe interim results on September 21st should start to shift investor attention to 2021. We expect management to highlight that exhibitor numbers are returning at encouraging levels, provide further detail on the phasing of events through next year, and on the opportunity to make structural savings of indirect costs to offset the lower revenue level. For Markets, we now assume a recovery in FY21E to 75% of 2019, and in FY22E to c.90% of 2019. Elsewhere, Taylor & Francis will face budgetary pressures on journal renewals and book sales through the start of the academic year, but multi-year contracts provide a degree of resilience. Grasping the nettle: Despite the earlier £1bn placing, balance sheet concerns remain – unfairly in our view. We currently assume leverage of 3.8x in FY20E, falling to 1.5x at YE21E. One covenant (3.5x) exists on the US private placement – starting negotiations at a time with greater visibility on the outlook for Markets to generate cash-flow should make them easier, but the debt could easily be repaid (with associated costs) if required. A worst case scenario of this costing £1.2bn, and a working capital outflow of £200m in 2021, would still leave the company with liquidity of close to £900m, relative to an estimated current cash-burn (even before further indirect cost savings to come) of <£50m per month – at a time when the bond markets remain open too. Finding a floor: Overall, we cut revenue and EPS by 12%/36% in FY20E and by 8%/24% in FY21E; FY22E EBITA falls 7%. From a fundamental standpoint, our FY22E EBITA would have to fall nearly 30% to move our DCF to the current share price, and the multiples (a PE of c.11x and FCF yield of >10% in FY22E) leave significant scope for expansion mid-term.
Today’s announcement from Ascential that it has cancelled the remaining iterations of its Money 20/20 events series for 2020 casts into relief the growing risk to the exhibitions industry and specifically, to Informa’s financial performance. Although It remains too early to accurately assess how Q4 will land, we are increasingly concerned around the potential for exhibition cancellations to drive significant forecast downgrades. With this in mind, and notwithstanding the group’s solid medium-term potential, we have decided to moderate our recommendation from BUY to HOLD until a clearer picture emerges.
Is it time for events to take a curtain call? After all, Informa shares have dropped 45% YTD and Covid-19 disruptions could stretch into the long term. But the show isn''t over yet: using our in-depth survey of Western and Asian exhibition contacts, detailed scorecard analysis, and a new, (predictive) event-tracking tool, we find KPIs recovering and a revamped, higher-margin business model ready to take the stage. We reinitiate coverage at Outperform with a 580p TP. Structural drivers to underpin cyclical recovery Post Covid-19 KPIs look encouraging, with trade fairs running at 80% capacity, exhibitors suggesting transaction peaks and states adopting rule exemptions for trade fairs, as they play crucial roles in city economies. Our industry contacts argue that the recovery path will be long, with China leading the pack. Helped by structural growth drivers (rising exhibition budgets within B2B marketing mix, capacity venue growth, globalisation) the appeal of ''face-to-face'' remains strong, we think. We expect trade fairs to recover to the 2019 peak by 2022 and conferences by 2023. Informa well placed to adapt to Covid-19 disruptions Disruption could open opportunities for larger players such as Informa, which generates 45% of Markets revenues (50% group revs) from its top 30 (out of 500) events. We expect consolidation to accelerate, barriers to entry to rise, and a potential margin boost from economies of scale. Hybridisation of Virtual/Face-to-Face events adds value to the proposition Virtual is here to stay. With exhibition organisers transitioning from a mere sales channel to 360-degree value creators, the digital offer will be an important component in the value chain. Despite a limited revenue impact for now, Informa''s digital tools have started to support margins. Reinitiate coverage at Outperform; TP of 580p offers 25% upside Informed by industry expert feedback, our new estimates also reflect the recent trading update and the...
Providing a trading update coinciding with its AGM, Informa reiterated that the outlook on physical events currently remains globally “unpredictable” despite signs of a return to business in Mainland China. Gradual recovery likely, as expected. Talks with US debt holders are ongoing and expected cost savings are raised from £130m to “at least” £400m. No changes to our forecasts at this stage.
COVID-19 has had a profound impact on the global exhibitions / events industry, however Informa has moved quickly, rescheduling, reducing costs, conserving cash and, most significantly, raising capital to buttress its balance sheet. We believe this proactive approach bodes well for the future and, whilst acknowledging that current uncertainty significantly heightens forecast risk, view its stock as offering good medium-term value. We have therefore upgraded our (previously under review) Hold recommendation to BUY.
Issuing a Q1 20 trading statement, Informa announced that it would temporarily suspend dividends while accelerating cost savings due to COVID-19. It also announced its intention to place a maximum of 250,318k ordinary shares (i.e. c.19.99% of the current share capital) via bookbuilding to be launched today. Note that 125,159k shares (9.99% of the capital) will be issued under the company’s existing share capital authority and 125,159k will be issued conditional to shareholders’ approval (meeting due on 4 May 2020).
Bigger impact, slower recovery Informa has announced today that it has seen a bigger than initially expected impact from Covid-19, and that the recovery is likely to be more gradual than initially planned. On trading, note the significant impact of the crisis on Events in Q1, with no large Events planned for Q2 or much of Q3 now. The postponement programme has expanded, with £460m now rescheduled into the last 2 months of FY20 and £150m of rephasing/cancellations – management note that venues are starting to re-open in China, but that the process is gradual (with a focus on domestic exhibitors first, c75% of total). The Taylor & Francis / Informa Intelligence divisions have continued to see robust performance given subscription demand for their data. Cost-cutting and equity issuance In response, on the cost front it has suspended dividend payments and implemented cost reductions to have an annualised impact of £130m in FY20. On the balance sheet, it has started discussions with US private placement holders to get a covenant waiver (3.5x) – we believe this should be feasible for a fee, and would remove the one overt potential issue. It has also applied to the relevant Bank of England scheme to be able to issue commercial paper and lastly launched a proposed placing of 19.9% (250m shares, or c.£1bn). Grasping the nettle Despite the radical measures announced today, fundamental demand for Informa’s businesses should remain strong into FY21 and these actions should allow investor focus to switch to the value that the company can generate once the crisis eases.
Addressing the issues: In a fast changing situation, we believe management did an excellent job of setting out the risks and their robust plan to mitigate and work through them. As a first point, a reminder of their subscription revenue exposure (c.35%) and the robust trading in early 2020 provides reassurance on a significant amount of cash being generated this year regardless of virus concerns. Flexibility is key: Informa’s geographical diversification makes a sustained simultaneous global shutdown of Events unlikely. In China, the company is already seeing signs that the worst has passed with potential event venue re-opening in June and 2021 events are unlikely at this point to see significant weakening of demand from a concertina of the event schedule. Venues are starting to offer cost waivers to mitigate the profit impact for Informa and significant cost reductions have been identified, ready for worst case scenarios. Balance sheet some way from intensive care: For long-term valuations to eventually matter, balance sheet concerns need to be addressed. Informa benefits from positive working capital dynamics, and we would highlight that on the one part of their banking facilities that has a covenant (3.5x), the company would likely be successful in repaying the loans from other facilities or seeking a waiver if required. Taking a step back: We cut group earnings by 21% in FY20E – with a higher 2019 base & FX moves providing a modest offset to Markets being down 11% this year. This moderates to earnings falling 14% in FY21E as events restart. Overall, we recognise significant short-term headwinds, but long-term the fundamental value of the group is highly unlikely to have fallen to the extent being priced in – a >40% PE discount to RELX in FY21E seems unduly harsh.
Informa reported very sound FY9 results, with revenues up +3.5% organically, a very solid 32.3% margin, adjusted EPS was 51.3p (+4.3%) and the final dividend is raised by 7.4% (total dividend: +7.3%). Conversely, and unsurprisingly, there is no guidance for FY20e due to the impact of the coronavirus on the events business. At this stage, a Postponement Programme has been put in place, shifting the events calendar to later dates in 2020… Our model is under review to adjust our forecasts.
Strong FY19 results Informa has reported strong FY19 results, with revenue of £2890m driven by 3.5% organic growth and EBITA £933m c.2% ahead of consensus. EPS at 51.3p, FCF of £722m and DPS of 23.5p were all also ahead and demonstrate the cash generative capacity of the group which underpins growing cash return potential. By division, Markets at 4.3% was broadly in-line, and the Taylor & Francis academic publishing division accelerated to 2.4% (with higher margins). Significant rescheduling progress On key aspects of the outlook, management initially noted that its 35% of subscription revenues continues to grow (Intelligence & academic publishing divisions), and that Markets saw good trading in the first 2 months. As of today, it has rescheduled 45 large events later in 2020 (representing £350m of revenue, or c.25% of division), as well as 70 smaller events with £50m of revenue (and is virtualising some small events) – whilst it has cancelled 13 events in 2020 with revenue of £25m (c.2% of division). Some cost mitigation The company notes that for the events running in 2020, the Markets division will incur incremental marketing / venue costs, albeit subject to the scope a) to use existing budgets and b) of insurance outcomes. No formal group guidance has been given, but may – for the moment – provide a degree of reassurance about the overall impact (ability to reschedule / insurance in place etc). Looking further out Looking out a year, Informa trades at 10x FY21E earnings (vs RELX at 17x) with a dividend yield nearing 5% – whilst we recognise the significant short-term headwinds in 2020, the eventual easing of virus concerns should allow the bulk of demand in the exhibitions business to return relatively robustly, restarting the process of delevering and underpinning cash returns.
We regard Informa as a high-quality business and a core medium-term Media sector holding but have become increasingly concerned that measures to prevent the spread of the Coronavirus could have a significant impact on the performance of its core Exhibitions operations. It remains difficult to accurately model the potential impact of this fluid situation but (notwithstanding recent share price weakness) we cannot comfortably recommend that investors increase exposure to INF at present. We have therefore decided to moderate our recommendation from BUY to HOLD ahead of 10 March’s full year results when a more detailed information set should be available.
Putting China in context: We estimate China is c.25% of the Markets division, and that less than 10% of FY China revenues are generated in Q1 (where events are now being rescheduled). The bigger contribution comes from events in late Q2 onwards (when rescheduling in 2020 gets harder) – a heavy domestic skew of exhibitors will help revenues if events do run, but if cancelled we do not expect insurance to have a major offsetting impact. We expect more details at the FY results (10 March), but if all China profits were lost, it would be a 15% impact on group earnings in that year, albeit a negligible impact on long-term fundamental value if forecasts were unchanged after that. Underlying drivers remain robust: Aside from the scope for the virus impact to reverse, easing Hong Kong political disruption, the absence of the Dubai Expo and a return to growth in the UBM Fashion portfolio should all also boost Markets growth in FY21, underpinning the outlook for a significant period. More fundamentally, the recent UFI survey of exhibition organisers also provides comfort – exhibition organisers expect better trading conditions in the UAE, UK & China (amongst others) in H2 relative to H120. Longer-term, the structural upgrade of the exhibition business model is yet to be appreciated – the MarkitMakr initiative (launching online marketplaces for industry buyers/sellers that attend the exhibition) should notably improve the resilience of the division. Extreme valuation discount: Informa now trades at c.15x FY20E earnings, close to a record discount to RELX in recent times, despite the potential for faster growth over time and incremental cash returns as M&A slows (the opposite trend to RELX currently). We believe this is unduly harsh, and see scope for re-rating once coronavirus concerns ease.
Risk division maturing: The Risk & Business Analytics division missed its target to deliver the same 8% growth as 2018 – the contribution to growth from new products (5%) remained steady despite the inclusion of fast growing acquired businesses into the organic growth in FY19, and the contribution to growth from the underlying market continued to shrink (2% of the total). Although management attempted to reassure on the trajectory of growth into FY20, noting a pick-up in activity relative to H119, we believe the underlying market could continue to weaken mid-term given the ongoing absence of auto insurance premium inflation (for the first time since RELX have owned these assets) and scope for market share competition between insurers to ease. Signs of maturity and cyclicality in the division representing the largest part of consensus valuation could lead to de-rating. Tailwinds easing: Elsewhere, we see a number of incremental headwinds (however modest) to earnings growth. Management would not comment on the proposed executive order to make US federally funded research Open Access, but we believe removing another 8% of global science from behind a paywall will have a notable deflationary impact on subscription contract renewals elsewhere. Separately, leverage in FY19 (at 2.5x) reached the top end of the target range – even before the >$800m of acquisitions already in 2020 – leading the buyback to be cut to £400m this year. Priced for perfection: Post results, we increase our EPS forecasts by c.1% reflecting the higher FY19 base. We recognise that the track record of resilient growth and role as a UK-listed bond proxy justify a premium valuation but, at >21x FY20E earnings (a 40% premium to Informa), we believe it leaves little room for disappointment.
We like Informa’s leading position in the global exhibitions sector and expect a combination of steady / predictable progress in this area and improving momentum and growth from its other activities. We have long viewed the group’s stock as a core longterm Media sector holding and have decided to upgrade our recommendation from Hold to Buy following recent share price weakness.
Informa issued a reassuring trading update for the 10 months to end-October and said it was on track to deliver its FY19e targets, with a good forward pace for the important last two months of the year.
Hong Kong disruption: Looking at the detail, we assume just under 3% organic growth for their 10m trading update on 11 November (after 3.3% in H1) – most divisions should see modest acceleration, but we assume Markets slows to c.3% from 4.4% in H1, given major HK events run in the quarter which may have been disrupted by political events (as well as weaker Fashion and Middle East construction events). Hong Kong represents c.8% of divisional revenues for the full year, and so this may weigh on FY divisional guidance in 2019 (currently set for Markets at ‘4.5%+’), but it should not be a recurring factor, and it creates an easy comparable into 2020, helping to ensure growth can be sustained (or potentially accelerate if demand comes back) over the medium-term. Structural improvements: Longer-term we believe investors should focus much more on the scope for incremental positives around a) their latest initiative to build ‘Auto Trader’ like portals for the B2B industries served by its exhibitions (more detail may emerge at their exhibition site visit in Frankfurt on 6 November, we estimate just 20% of divisional events have these currently), and b) their increasing balance sheet headroom providing potential for accelerating cash returns. Pricing bearish scenarios: Even in a bearish scenario for consensus earnings with updated FX forecasts and no assumption of HK demand returning, the stock – at 15x FY20 consensus earnings – would still trade at a c.20% discount to RELX despite likely faster organic growth in FY20/21. We therefore see significant scope for re-rating over time.
Informa’s interims detailed a robust H1 performance, confirmed the successful completion of its post-UBM integration and reorganisation programme, and reiterated management expectations for the full year. We remain positive on the quality and scale of the group’s portfolio of global exhibitions / B2B brands and the organic growth, cash generation / debt reduction, and visibility that this exposure should deliver. That said, our fair value assessment of 813p per share suggest its stock remains a solid HOLD for now.
Informa reported solid H1 19 results, with a +3.4% organic revenue growth and a +8.2% organic growth in adjusted operating profit. The company said it was on track to deliver its FY19e targets, with a good level of visibility and raised its interim dividend by 7% to 7.55p (we had expected 7.50p). Our model is under review and our positive guidance is expected to be reiterated.
Sustainability in vogue: The perceived cyclical risk to the exhibitions division is the key driver of the valuation discount to RELX in our view, but this division once again outperformed – despite the expected H2 skew of growth this year, it saw 4.4% organic growth, versus FY guidance of 4.5%+. This came despite the Fashion segment (under-invested under UBM) seeing double-digit declines and Middle East demand being impacted by the forthcoming World Expo in Dubai next year. All macro trends being equal, these headwinds easing could support accelerating divisional growth into FY20/21, rather than any slowdown. Making Marketplaces: This ‘quality upgrade’ of growth will be supported by the MarkitMakr initiative – where Informa launches online marketplaces for the niche B2B industries its exhibitions serve (free to exhibitors / attendees), which should boost rebooking trends and pricing power over time. We estimate this initiative covers c.20% of the division currently, but could reach 70% in 3 years. Re-rating to continue: We upgrade our EBITA forecasts by c.3% out to FY21E (1.5% in FY19E), but this moderates to c.1% at the EPS level given the latest guidance on interest under IFRS 16 and modestly higher minorities. The impact of EBITA changes, plus the re-rating of peers, leads our DCF/SOTP-driven price target to increase c.11% to 975p. The stock currently trades at c.16x FY20E earnings, still a significant discount to RELX at 20x despite similar organic growth. We see much scope for this gap to close over time as Informa continues to deliver on its promises and revenues/earnings/dividends see accelerating growth.
Fundamental drivers to remain robust: Although interim results in late July will show the natural skew of FY19 organic growth towards H2 (exacerbated by tough comps at Taylor & Francis), we expect them to provide a helpful reminder of the resilience of the fundamental growth drivers at Informa – with new product sales driving accelerating growth in the Intelligence division (skewing risk to FY20 consensus growth estimates to the upside), exhibition markets all continuing to grow robustly (outside the Middle East) and self-help margin expansion coming through as hoped. Micro, not macro, to drive Markets: Middle East exhibitions this year are being impacted by demand shifting to the Dubai Expo event in 2020, US construction events will be impacted by a quadriennial trade association event next year and the last UBM Fashion venue contracts only expire in H120. That said, if macro trends remain unchanged, we still expect Markets to see faster growth in FY20 than in 2019 – these timing factors become tailwinds in FY21. B2B platforms, not events: More structurally, Informa’s efforts to roll out the MarketMakr initiative (creating online platforms for the niche B2B industries their events serve) could be a hidden source of value mid-term, boosting the resilience of Markets division revenues and improving pricing power. Dividend growth to accelerate? With 2019 seeing the last of the portfolio clean-up, 2020 should also bring a return of focus on how its balance sheet flexibility can be utilised – we expect bolt-on deals in Intelligence and see scope for faster dividend growth given the pay-out ratio below 50%.
Informa’s FY 18 results were in line with expectations, including UBM since 16 June. Management had a confident tone for FY19e as it has good forward visibility on revenues (>50% of Exhibitor and around 2/3rds of subscription revenues already booked). The target is to keep a >30% operating margin (supported by cost savings) from a revenue base of c.£3bn, while generating solid operating FCF enabling it to increase the dividend progressively from now on. Our Buy recommendation is reiterated.
Informa reported a trading statement for the 10-months ending October 2018 The group’s underlying revenue grew 3.9% in the first ten months. The combination phase of “accelerated integration plan” for UBM is completed. Revenue growth is on track for the full-year target (+3.5%).
Informa reported solid H1 18 results – including UBM from 15 June, with +4.3% revenue growth and +1.9% growth in adjusted operating profit. The operating margin was therefore a tick lower than last year’s restated accounts at 30.8% (versus 31.1%). The company is confident of the UBM integration and confirmed its target of 3.5% underlying revenue growth in 2018 and said it is on track to deliver savings targets of £50m in 2019.
In these four short videos Liberum’s Media Analyst, Ian Whittaker, looks at the impending takeover of Informa by UBM, focusing on the value of the UBM assets, and the potential structuring and restructuring of the new group.
We now include in Informa estimates the impact of the UBM acquisition, which we think will pass regulatory scrutiny. Overall, we like the acquisition for the impact it has on Informa’s business although we are concerned over the quality of some of the UBM business, namely around the ex-Advanstar assets. We also think that Informa may look to merge its Academic business with that of Bertelsmann Springer, taking a large minority stake.
Informa’s FY 17 results were in line with expectations, with revenues at £1,757.6m (up 30.7%, reflecting Penton’s integration and +3.4% organically) and adjusted OP at £545.5m (+31.3% and +2.3% underlying; margin of 31% compared with 30.9% in FY 17, slightly under our own 31.1% forecast). Adjusted EPS rose by 9.5% to 46.1p (AV was 47.3p), i.e. in line with the recent guidance for “above 45.5p”, and the proposed final dividend is raised by 5.8% to 13.8p, i.e. the recent guidance for a full-year dividend at 20.45p versus 19.3p for FY16 (+6% yoy). The FY18e outlook is for “at least 3.5% underlying growth” (with another strong year anticipated for Global Exhibitions) for standalone Informa, which, as a reminder, recently made a 30% premium recommended offer for UBM in order to create an events giant (65.5% owned by Informa’s shareholders and 34.5% by UBM’s).
As anticipated since 17 January (please refer to our UBM Latest), Informa today confirmed a 30% premium recommended offer for UBM whose shareholders will receive 1.083 new Informa shares and 163p in cash (valuing UBM at c.£3.9bn or 971p per share based on the 15 January 2018 closing price of 746p per Informa share; c.908p at yesterday’s closing). The deal will create an events giant (65.5% owned by Informa’s shareholders and 34.5% by UBM’s) as UBM and Informa are respectively the world no.2 and no.3 events organiser behind RELX.
Informa has published its bid document for UBM, with the main highlight that it is targeting at least £60m of annual synergies from the bid for UBM, higher than market expectations. It has also published a trading update which is line with expectations but the target of at least 3.5% underlying revenue growth for 2018 is positive and better than our 2.8% forecast. Presentation on the bid at 8:30am.
After a satisfactory +3.7% H1 17 consolidated organic revenue growth (accelerating from +2.5% for the same period last year and +1.6% for FY16) Informa reported a sound 10 month 2017 top-line organic trend of +3.2% (compared to +2.5% for the 9 month period last year). Reported revenues rose by 40% (Penton integration). The group reiterated its FY17e guidance for “good progress”, saying it remains on track for a fourth consecutive year of growth in revenue, earnings and cash-flow. This will be supported by solid trading in Global Exhibitions (note the high H1 bias this year, with flat performance anticipated for the last 2 months; fewer Top 30 events in H2), modest positive growth in Academic Publishing and improving operating momentum in Business Intelligence.
Organic growth at the 10 month stage was slightly stronger than we had expected, reflecting a solid performance across the piece (continued strong growth from GE, continued turnaround for BI and KN, a bit of reassurance from AP). While consensus estimates may need to shade back by 1-2% for FX, the underlying tone here was reassuring, and adds support to the argument that INF should be capable of delivering organic growth of 3%-plus pa from next year onwards. Coupled with bolt-on M&A in its fragmented EPS, we see potential for delivery of many years’ EPS growth around the double-digit level from the postGAP programme Informa. While the stock has performed quite well, valuation at 15x EPS / 3% dividend yield remains undemanding relative to this fundamental outlook, and Informa remains a core sector holding in our view.
Informa reported solid H1 17 results and above estimates, with revenue reaching £915.4m, up 41.3% (including forex for +12.8% and a perimeter impact – namely the Penton integration – for +26%) and up 3.7% underlying and adjusted OP at £285.1m, up 41% and 1% underlying (i.e. a 31.1% margin compared to 31.2% a year earlier; impacted by GAP depreciation and the mix from acquisitions). Adjusted diluted EPS improved by 12.7% to 24p and the interim dividend was raised by 6.2% to 6.65p. The group confirmed being on its way to deliver and even outpace the promised £14m operating synergies in FY18 (half in FY17e; to be reinvested in growth measures) following the integration of Penton. It reiterated its FY17e guidance for “good progress”, saying it remains on track for a fourth consecutive year of growth in revenue, earnings and cash flow. This will be supported by strong trading in Global Exhibitions, a steady performance in Academic Publishing and improving operating momentum in Business Intelligence.
Numbers look ahead of expectations, both top line (organic +3.7%) and bottom line (EPS +13%). Key features are the continuing strength in Exhibitions (+11% even with the lower-growth Penton assets included) and a decent print from Academic (+1.2%) which should ease concerns around textbook exposure. Although we do not anticipate our overall EPS estimates (46.4p for FY17E) changing materially, the pattern is encouraging with underlying trading strength offset by dilution from disposals and higher interest/minorities. Informa remains a favourite name in the sector for us, based on its GARP attractions.
Holding its Investors Day on 15 June, Informa confirmed that its 2014-17 Growth Accecleration Plan (GAP) was on track, while making a point on the benefits for its different divisions. This came after last month’s trading statement when the group reiterated its FY17e expectations for a fourth consecutive year of growth in revenue, earnings and cash flow. This will be supported by strong trading in Global Exhibitions, a steady performance in Academic Publishing and improving operating momentum in Business Intelligence.
Informa’s Q1 update reads fine, reconfirming overall full year expectations, with divisional trading commentary broadly as expected. Overall there’s no sense of upgrade here, with the divisional language here feeling slightly weaker than that used in March, and overall estimates also constrained by recent USD weakness plus ongoing disposal plans (now including part of the textbook operations in academic). While this update feels a little muted, we do continue to see good value in the shares at these levels and reiterate our Buy rating.
Informa’s shares have drifted back from January highs reflecting top line weakness in two smallish parts of the portfolio (academic books and local conferences). While such a broad-based group is always liable to have pockets of weakness, we think neither is a major concern, and we see the longer term GARP fundamentals as very much intact. These are steady growth in EPS of 5-10% pa, very strong cash flow, and a solid dividend growing at least 4% pa, at a reasonable valuation. This should be highlighted in an upcoming investor day in June. Valuation now looks attractive again relative to key peers (UBM, Relx) and we would buy into the recent weakness.
Results look in line on profits but light on organic growth, reflecting weakness in two small areas (textbooks and local conferences, respectively 2% and 4% of group revenues). We expect to maintain EPS estimates at around 47p for FY17E and 51p for FY18E, supported by a good margin performance plus the recent bolt-on deal in Exhibitions. The long term picture (steady 8-10% pa EPS growth from a combination of defensive organic growth plus bolt-on M&A) remains in place and attractive in our view. However, we would not be surprised to see a bit of weakness today, on the back of these slightly underpowered numbers.
More consolidation in the professional information sector, with a $3.3bn bid in the US for corporate training business CEB by IT consultancy Gartner. The valuation being paid, and the leverage being employed, both reinforce our conviction that (a) Penton looks like a good acquisition for Informa, and (b) Informa shares remain attractive for their ‘safe GARP’ characteristics.
Against the backdrop of a highly uncertain global macro-economic outlook, we stick with a stock which we believe can generate solid economic returns, with defensive self-help characteristics, on an undemanding valuation. We believe the £1.2bn acquisition of Penton strengthens a platform from which Informa can deliver 5-10% pa EPS and FCF growth for many years to come, with limited country or sector risk, low pension or other financial risk, low technology risk, and low valuation risk. A great stock for unpredictable times, in our view.
Nine month trading looks slightly light of our estimates, although the group indicates it is on track to meet full year market expectations. Growing confidence around GE and BI are offset by continuing dullness in AP. Overall we do not expect any material changes to estimates, with c2% EPS dilution from completion of the Penton deal, and perhaps a small shave to organic growth on the back of this update, broadly offset by a c2% boost from current FX rates. We remain positive, based on the stock’s attractive ‘safe GARP’ fundamentals, but would not be surprised to see a bit of profit taking in the near term following a good run for the shares.
Having now completed the £1.2bn Penton acquisition, Informa will provide a trading update on Monday November 7th, which we preview briefly here. Penton sets the tone in our view for what to expect from Informa going forwards: solid underlying EPS growth of c5% pa, augmented to around 7% pa including acquisitions, or TSR of 10% pa including dividends. Okay it’s not stellar, but it’s solid, and visible for many years given Informa’s fragmented markets. Valuation remains undemanding in our view at around 14x EPS (FY17E), despite the shares’ good run already. Indeed, in current uncertain markets, Informa’s growth, defensiveness and visibility look particularly attractive, and we reiterate our Buy rating and 825p TP.
Informa has just announced the acquisition from MidOceanPartners and Wasserstein of the US group Penton Information Services for £1.2bn. The operation will be funded through the issuance of new debt and a fully-underwritten £715m rights issue (at 441p each for every four existing shares; a 36% discount to yesterday’s share price) expected to occur on 11 October 2016 just after the 10 October General Meeting for Shareholders. The completion of the operation is scheduled for November 2016.
Informa announced H1 16 results globally in line with expectations, with revenues at £647.7m (up 4.7% and +2.5% organically) and adjusted OP at £202.2m (+6.3% and -0.7% underlying; a margin of 31.2% compared with 30.8% in H1 15). Note that, mainly due to the sterling weakness versus the US dollar in the aftermath of Brexit, forex had a c.£23m positive impact on revenue (<4%). Adjusted EPS rose by 3.1% to 23.1p after c.23% higher interest costs linked to the cost of debt ($250m US Private Placement loan notes of Q3 15 at higher rates) and the fact that c.80% of total debt is dollar denominated. The interim dividend is raised by 4% to 6.80p, in line with our expectations (as a reminder, the group increased its minimum dividend commitment from 2% growth to 4% through to the end of the Growth Acceleration Plan). The FY16 guidance was reiterated for a further period of “earnings and cash flow growth, including a full year of positive organic revenue growth in Business Intelligence.”
H1 results look in line with expectations overall, and we do not expect material changes to forecasts. Top line growth remains highly skewed to the Global Exhibitions division though, with the other three divisions labouring slightly in H1. Net interest also steps up due to the write-off of a loan note, and net debt steps up due to FX. Near term, after a very strong run, and absent upgrades today, the stock may now pause for breath. Longer term, Informa remains one of our favourite stocks in the sector, for the relatively defensive GAPR attractions it offers, especially in an uncertain post-Brexit world.
Tactically, we would be a little cautious going into the H1 results this week, as we expect H1 growth to be subdued by phasing effects, and net debt to be pushed up by FX. The shares have had a strong run recently, so any weakness through H1 would be welcome. Strategically, Informa remains one of our favourite stocks in the sector, for the relatively defensive GARP attractions it offers, especially in an uncertain post-Brexit world.
In a post-Brexit list, we put Informa back on the conviction list. Informa is a very different business to the cyclical group of 2008, and offers solid growth prospects with limited cyclical risk, at an attractive valuation. The relative safety stems from its business profile (low UK, high US/Middle East, and low adspend/high subscription revenues), its self-help characteristics (internal turnaround of two divisions, capacity for accretive bolt-ons), and its strong financials (comfortable leverage, very strong cash flow, no pension deficit, good dividend cover). Valuation-wise, the stock stands at a significant discount to its key large cap peer (RELX). Our new estimates and Target Price, updated here, are boosted by recent FX moves.
There are two main issues to consider for the Media sector, UK recession and currency. Large and mid-cap B2B is likely to be a net beneficiary of sterling weakness as they are heavily exposed to US$, while exposure amongst small cap B2Bs is typically modest but may well be enough to offset any domestic weakness. B2B looks a good safe haven and Informa (TP690p, Hold) and UBM (TP605p, Buy) look good value. Marketing Services is a barbell subsector; WPP’s might overseas and in its offering will probably outweigh its still significant UK operation. At the smaller end individual client mandates will be more important, client losses are hard to predict and potentially UK expertise could look cheap to overseas businesses. Consumer media looks more vulnerable. A mix of high domestic exposure, cyclical exposure and high operational gearing looks poisonous. ITV, Rightmove and Autotrader look likely to suffer.
Informa Plc UBM Development AG
Entry into the FTSE100 has been confirmed. The shares have moved ahead based on positive sentiment and were arguably getting frothy. Entry into the FTSE100 will add to the valuation and INF is now trading more closely to RELX Group valuation of 13x EV/EBITDA FY16e. With that in mind we lift our target multiple for INF to 13x. Immediate downside risk is from US$ strength reversal (INF benefits from both translation and transaction exposure) if BREXIT does not occur (BREXIT unlikely in the writers personal opinion). The table below sets out our revised estimated shareholder return profile. On this basis our TP rises to 690p implying a 12month TSR of 1.8%. The shares remain a Hold on a 12month basis but could be subject to some profit taking after the recent run.
Informa announced *FY15 results globally in line with expectations*, with revenues at £1,212m (up 6.6% and +1% organically; AV was £1,215m), and adjusted OP at £365.6m (+9.5%; margin of 30.2% compared with 29.4% in 2014; AV was 29.7%). EPS reached 42.9p, slightly above our expectations (41.4p) while the dividend is up 4.1% for the full-year (the group indeed increased its minimum dividend commitment from 2% growth to 4% through to the end of the Growth Acceleration Plan). The FY16 guidance (which is the year 3 of the Plan) is for a further period of “earnings and cash flow growth, including a full year of positive organic revenue growth in Business Intelligence.”
Business Intelligence achieved a return to growth in Q4, a year earlier than targeted, and showing that the Growth Acceleration Plan is working. Academic growth looks unlikely to improve in 2016 and investment will offset the US$ transaction benefit. Investment will also ramp across the group in 2016 and long term CAPEX looks likely to settle at twice pre-GAP levels. This ultimately will feed through to margins and we flag investors need to reflect carefully on just how well optimised margins already are (they broke 30% in 2016). Ultimately the GAP and US$ provide a lift and we highlight that in the current climate INF is a good stock to own given quality of earnings and visibility levels. There is a good yield supported by a clear 4% pa minimum growth promise. While the stock doesn’t meet our Buy criteria for our 12 month rating system, the medium picture combined with quality and yield will be attractive to many.
Prelims look solidly ahead of expectations, with a resilient underlying performance pointing to increasing confidence in the turnaround of the two underperforming divisions (BI and K&N). This increased confidence is reflected in the raised dividend commitment (4% minimum pa versus 2% previously). The valuation still looks very attractive to us for a stock offering relatively secure growth supported by defensive businesses and self-help characteristics. We expect consensus estimates to move up by c5%, and reiterate our Buy rating and 750p Target Price.
A 2% beat at the PBT line, a move back into growth for Business Intelligence (BI), a better dividend growth commitment, a sluggish academic market and reasonable outlook make for a positive statement overall. Outlook is for BI to report growth across the year rather than just at end of year backed by good recent renewals experience, Academic to at least match last year’s sluggish 1.6% growth, Global exhibitions to see further good growth and for Knowledge & Networking to get back to at least flat (German conferences now being retained and will be reorganised). The dividend growth commitment has been increased from 2% to 4% for 2016 and 2017 (minimum 21.7p in 2017). INF looks like the right type of stock to own in the current climate. It offers relatively good stability and visibility with a goo supporting yield. Based on slightly higher estimates and a move to a TP target multiple to 12x FY16 (REL trades on 12.2x) from 11x FY15 on the Basis that INF has continue to progress with the execution of GAP the stock looks to be worth a solid 600p. The shares have eased in line with our last comment but at this point we think this is the right type of stock to own in current client.
Falling share prices point to evaporating confidence in global economic growth as we run up to Informa's prelim results due this Thursday. We remain positive on the stock, and would actually become more positive on it in a weaker macro-environment, for its significant defensive and self-help characteristics as detailed below. In fact we see defensive attractions which are not dissimilar to peer Reed Elsevier, at a much lower valuation (13.5x FY16E EPS, with a 3.5% yield, compared to 17.2x for REL). We reiterate our Buy rating and 750p Target Price going into these prelims.
In addition to reminding investors about the Investor being held today the company has provided a trading update confirming that trading remains in line with the update issued on the 20th October. The update goes on to confirm that Informa has disposed of the two Dutch conference businesses. The Company had indicated these were under review and so it is of no surprise. We don’t expect any material consideration or profit impact form the disposal which is essentially a portfolio tidying exercise aimed at improving the quality of the events business. Further small disposals and closures would not be a surprise particularly as management seeks to improve the trajectory before 2016. As we have previously flagged the investor presentations are likely to be supportive. US$ strength, if sustained, is also modestly positive for forecasts. The shares have edged up ahead of the briefing and are close to 12x 2016e EV/EBITDA (our TP equates to 11x) and a small discount to Reed Elsevier (12.6x). This looks full without some material news. This would probably have to come from the Business Intelligence business that INF is targeting to get into growth by the end of 2016.
Reporting its first 9 months 2015 trading statement, Informa stated it saw no major change in Q3 trends. Consolidated organic revenue growth reached +2% (adjusting for the impact of events phasing, i.e. namely the absence of two significant non-annual exhibitions), similar to H1 15, as trading conditions remained strong in North America and the UK, which generate c.60% of total revenues. As usual, the group did not release its operating profit for the period but management reiterated its FY15e expectations, with unchanged Growth Acceleration Plan spending (£70-90m), funded from free cash flow.
Organic growth was c2% for the first 9months after adjusting for negative phasing (events move into Q4 from Q3) with reported growth higher at 6.9%. In Q3 Academic organic growth was flat, Business Intelligence rate of decline improved further, Global Exhibitions saw an acceleration to 10.6% (+6.4% H1) and Knowledge & Networking saw no improvement (underlying organic similar to -5.5% in H1). The Company re-confirms full year expectations. There are some risks to Q4 (Business Intelligence one-off sales and Academic must pick up), but the strength of Exhibitions and acquisition of FIME (Americas healthcare exhibitions) should help. There are no comments on cash or net debt. The shares have picked up again and are towards the upper end of their trading range. While the underlying picture is a touch soft the substantial forthcoming investor seminar in the US is likely to be supportive (senior management from all three divisions will be available, there will be a round for presentations and the Greenbuild show will be attended). There is a conference call at 9.30am today which will hopefully shed more light on trading trends and the outlook for Academic.
H1 15 Informa's revenues were up +8.6% to £618.8m with organic growth of +2% (adjusted for the phasing of exhibitions), while adjusted OP rose by 14.2% to £190.4m, i.e. a positive 150bp improvement in profitability to 30.8%. Despite challenging trading conditions continuing for Business Intelligence and Knowledge & Networking (combined c.41% of total revenues; both recording lower profitability as expected, impacted by investments and reorganisation), the latter was driven by the solid results made by Exhibitions, partially reflecting the two recent US acquisitions. Adjusted EPS is up 8.5% to 21.8p and the group announced a slight increase in its interim dividend (+2.3% to 6.55p).
Overall the interims were on track and the company is indicating the GAP (growth acceleration plan) is on schedule and on budget. The dividend is being increased as expected and remains a key support for the share price in our view. The company has announced a few small disposals that help the growth profile of Business Intelligence and put some of the European conference businesses also up for sale which will improve the group’s growth prospects if executed. Overall INF remains on track save its early days still in turning round the BI unit. US$ volatility the most important factor in revising numbers and we expect a small tweak down at this stage.
Informa reports H1 numbers this Tuesday July 28th. We remain positive on the shares, which offer turnaround and growth attractions at an undemanding valuation. Near term though, we flag up some ‘known unknowns' particularly around phasing, which could cause volatility – either way – in these results. As a consequence we will focus more on FY guidance than on the H1 out-turn when these results come out.
An update of our forecasts results in a small net upgrade to EPS. Broadly we continue to see flat EPS for FY15E – in line with consensus – but then a return to good growth from FY16E onwards. We think that the bear case on the stock – low growth for several years – looks way too cautious, and that the current valuation does not adequately capture either this growth or the defensive quality of this business. We maintain a Target Price of 570p (23% upside by end2015, excluding a safe 4.2% dividend yield) and reiterate our Buy rating.
