Business Overview
Informa Plc was incorporated in the year 1998. The company’s business operations are mainly in the United States, North America, Continental Europe, and the United Kingdom. Informa Plc is a London, United Kingdom-headquartered based group which deliver intelligence-based products, services using vast data and research for customer and companies in more than 30 countries. The group is a constituent of the FTSE 100 index. The operations are differentiated in five operating segments: Informa Intelligence, Informa Connect, Informa Markets, Taylor & Francis, and Informa Tech. The Business Intelligence segment as the name suggests works for providing intelligence and insight to professionals. Its global exhibition division engaged in providing business to the exhibition and trade shows and various patron events as well.  Its knowledge and networking division operating segment engaged in providing conferences and training courses across the world.

On 10^th March 2020, the company will announce the 2019 full-year results.

Management

The current Chief Executive officer of the company is Stephen A. Carter. He joined the company as a Non-Executive Director in 2010.  He became Group Chief Executive in 2013. Gareth Wright is the current Group Finance Director of the Group. He joined Informa in 2009 and was responsible for various roles within the Group, including Deputy Finance Director. He became Group Finance Director in July 2014. The Group’s Chief Operating Officer is Patrick Martell. He is also the Chief Executive of the Informa Intelligence Division.

Key Statistics



Top Shareholders 

 

Company’s Strategy


(Source: Interim Report, Company Website)

The company works in four phases. Phase 1 comprises of Discovery & Validation while phase 2 contains combination. Phase 3 is the completion phase and Ambition & Creation are covered in the Phase 4. These all phases contribute to the company’s Accelerated Integration Plan (AIP).

Revenue Segmentation by Division, Type and Geography


(Source: Interim Reports, Company Website)

Informa Plc is divided into five divisions, namely, Informa Markets, Taylor & Francis, Informa Tech, Informa Intelligence and Informa Connect. The Group generates major part of its revenue from Informa Markets Division. The company is segmented into six types i.e. Exhibitor, Subscription, Unit Sales, Attendee, Marketing & Advertising and Sponsorship. Exhibitor is the major contributor of the Group’s revenue. The company mainly operates into five geographies. North- America, China, Continental Europe, UK and Rest of World. The company reports the highest revenue from the North America region.

Industry Overview

The global Entertainment & Media revenues in the UK is expected to rise at a compound annual growth rate (CAGR) of 3.5% to reach GBP 80.5 billion in the year 2023. Some segments that could generate the most revenue would be internet advertising and internet access. Together, these contributed some 40% of total UK E&M revenue in 2018. Some media and entertainment segment such as Virtual reality (VR), over-the-top (OTT) video, etc. are expected to boom in the next five years. There are five themes: Personal Space, Trust and regulation, Technology Innovation, New business models and trends and Implications for businesses, which are going to be focused in the media domain. Below is the chart of the segment wise media sector in which the compounded annual growth rate is expected for the next five years.



From the above chart, it is deduced that VR would be next big thing in the media domain followed by OTT video and Internet advertising. For the next five-year, VR segment is expected to grow at a CAGR of 22 per cent. OTT video and internet advertising are expected to grow at a CAGR of 14 per cent and 9 per cent respectively for the next five years.

Recent News
On 10^th January 2020, the company announced further investment in developing its publishing capabilities. It would invest through the addition of F1000 Research Ltd. by Taylor & Francis.

On 7^th January 2020, the company announced that it has started a process to identify a successor for its current Chairman, Derek Mapp. The company expected that it would find new Chairman by the end of 2020 and allowing a decent handover period to new Chairman.

Trading Update - Ten months (ended on 31^st October 2019)

On 11th November 2019, Informa announced its 10 months update ending 31st October 2019. The company showed growth in revenue, underlying profit, cash flow and earnings. The full-year performance remained on track for the year. The group showed 2.8 per cent growth in the underlying revenue for 10 months period followed by a strong seasonal trading period in November and December. The company-maintained focus on its Progressive Portfolio Management for the period. The company is looking forward towards entrepreneurship and tech innovation through launching a JV (joint venture) with Informa Tech.

Financial Highlights – H1 Financial Year 2019 (30 June 2019, £, million)


(Source: Interim Reports, Company Website)

In the first half of the financial year 2019, due to favourable tailwinds from the currency movements and the full period of contribution from UBM, which the company acquired in 2018, the company delivered 47.1 per cent reported growth and 3.4 per cent underlying growth in revenue to £1,407.6 million. Statutory operating profit increased by 65.5 per cent to £248.3 million and adjusted operating profit grew by £141.3m on a reported basis to £435.7 million, with underlying growth was 8.2 per cent. Statutory profit before tax rose to £232.8 million from £118.7 million in H1 FY2018, whileadjusted profit before tax was £377.8 million against £264.7 million in H1 FY2018. Adjusted diluted EPS declined by 5.7 per cent to 23.2 pence from 24.6 pence in H1 FY18 due to the increase in the number of shares in issue after the acquisition of UBM, despite strong growth in revenue and adjusted operating profit during H1 FY 2019. Statutory diluted earnings per share rose by 42.2 per cent to 14.5 pence. The company recommended an interim dividend per share of 7.55 pence (H1 2018: 7.05 pence), which represented a surge of 7.1 per cent in the interim dividend from the previous period.

Performance & Growth


(Source: Interim Report, Company Website)

In 2019, Informa Group underlying revenue growth was over 3.5 per cent. In the Informa markets division, the company witnessed underlying revenue growth of over 4.5 per cent. In the Informa connect division, the group reported underlying revenue growth of over 2.5 per cent. In the Informa tech division, the company’s underlying revenue growth was over 2 per cent while the Informa intelligence’s underlying revenue grew by 3 per cent. Taylor & Francis Group underlying revenue grew by over 2 per cent.

Key Performing Indicators

Total Revenue



The revenue of the company grew to GBP 2,369.5 million in FY2018 from GBP 1,137 million in FY2014, reflecting a growth of 20.15 per cent on a CAGR basis.

Gross Profit



The gross profit of the company grew to GBP 1,588.7 million in FY2018 from GBP 769.8 million in FY2014, giving growth of 19.86 per cent on a CAGR basis.
 
Operating Income



The operating income of the company grew to GBP 364.3 million in FY2018 from the operating loss of GBP 6.8 million in FY2014, which shows decent growth reported by the Group.

Financial Ratios


 (Source: Thomson Reuters)

The reported EBITDA margin in H1 FY19 was 34.2 per cent against the industry median of 19.6%. The reported operating margin was 20.7 per cent for the H1 FY19. Net margin reported was 14 per cent for the first half of 2019, higher from the industry median of 8.1%. Return on equity for the current first half stood at 3.1 per cent. On the liquidity front, Informa Plc’s current ratio stood at 0.59x. On leverage front, the debt-equity ratio of the Informa Plc’s was 0.53x which was slightly higher as compared to the industry median of 0.33x, reflecting that the company is more leveraged as compared to its peers.

Share Price Performance


Daily Chart as on 24^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 24, 2020, at the time of writing (before the market close, at 8:56 AM GMT), Informa Plc shares were trading at GBX 752.4, down by 2.50 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 900.80/GBX 697.20. The group’s stock is reflecting lower volatility as against the benchmark index based on the company’s beta of 0.802. The outstanding market capitalisation was around £9.71 billion, with a dividend yield of 2.89 per cent.

From the technical standpoint, 14 days-Relative Strength Index of the stock is hovering in the oversold zone, which is strengthening the upside move.

Valuation Methodology

Method 1: EV to EBITDA Approach (NTM)



To compare Informa Plc with its peers, EV/EBITDA multiple has been used. The peers are Pearson Plc (NTM EV/EBITDA was 8.68), WPP Plc (NTM EV/EBITDA was 9.24), ITV Plc (NTM EV/EBITDA was 8.94), Ascential Plc (NTM EV/EBITDA was 11.31), Trainline Plc (NTM EV/EBITDA was 28.76), Hyve Group Plc (NTM EV/EBITDA was 11.94), Goco Group Plc (NTM EV/EBITDA was 11.47) and Ferguson (NTM EV/EBITDA was 11.28). The Average of EV/EBITDA (NTM) of the company’s peers was 12.70x (approx.)
 
Method 2: Price to Earnings Approach (NTM)



To compare Informa Plc with its peers, P/E multiple has been used. The peers are Pearson Plc (NTM P/E was 11.64), Ascential Plc (NTM P/E was 18.44), Auto Trader Group Plc (NTM P/E was 23.40), Ashtead Group (NTM P/E was 13.08), Hyve Group Plc (NTM P/E was 15.79), Goco Group Plc (NTM P/E was 15.69) and Ferguson (NTM P/E was 18.54). The Average of P/E (NTM) of the company’s peers was 16.65x (approx.)

Valuation Metrics
 

(Source: LSE)

As on 21^st February 2020, the Price to Boook multiple of the Informa Plc’s was 1.7x, which was slightly lower as compared with the Media industry multiple of 3.5x, reflecting that the company is trading at a lower multiple as compared to its peers. The company’s net debt to equity multiple is 0.5x while the media industry D/E multiple is 0.7x which shows that the company is less leveraged than the respective industry.

Du Pont Analysis


(Source: LSE)

This analysis is a useful technique to decompose the different drivers of ROE. It can be further examined through three financial metrics which are: net profit margin, asset turnover and financial leverage. This analysis helps to deduce whether the company’s profitability, use of debt or assets that’s driving ROE. In 2020, the ROE is increasing as compared to its peers.

Informa V/S FTSE-100 Price – 1 Year


(Source: Thomson Reuters)

In the last one year, Informa Plc share price has delivered 7.54 per cent return as compared to 3.30 per cent return of FTSE-100 index, which shows that the stock has outperformed the index during the last year.

Dividend Yield


(Source: Thomson Reuters)

Informa Plc has a dividend yield of 2.89 per cent which is slightly lower than the industry dividend yield of 3.24 per cent and sector dividend yield of 4.52 per cent.

Informa V/S Industry V/S Sector – 5 years


(Source: Thomson Reuters)

In the last five years, Informa Plc share price surged by 56.48 per cent which is significantly higher than the industry growth rate of 29.84 per cent and sector growth rate of 13.74 per cent.

Informa Total return


(Source: Thomson Reuters)

In the last one year, Informa has delivered a total return of 10.56 per cent while the FTSE All share index has delivered a total return of 9.51 per cent.

Currency Chart (GBP VS USD)


The current currency exchange rates for GBP to USD is 1.2943.

Growth Prospects & Risk Assessments

Future performance looks promising for the company, as recent acquisitions and past capital expenditure will favourably impact the top-line of the company and bottom-line as well. Margins are expected to improve, and potential debt reduction is possible in FY20.  It is estimated that the return on equity would improve in FY20, as the company has completed its growth acceleration plan and company has potential to reap the full revenue, profit and cash flow through their international reach in the specialist market. The company is exposed to a variety of risks including currency exchange risk (especially US dollar), liquidity risk, other macro environment risks and uncertainties around the Brexit.

Conclusion

In many individual markets, the company operates close to its customers, which provides a depth and breadth to the business. Helped by this, the company has a strong foundation for consistent future growth and is on track to deliver its targets for 2019, despite ongoing uncertainty from US/China trade tensions and the planned departure of the UK from the European Union. From the perspective of the media market, Artificial intelligence is entering a new growth phase, due to the convergence of several trends. The Life Sciences sector enters the year 2020 with careful optimism amid a great deal of change. Biotech innovation is booming, new drug classes are emerging and gaining regulatory approval, and exit markets are healthy. The international banking industry is in decent health, with profitability, assets, and capitalisation all increased significantly since the international financial crisis. The international pharmaceutical manufacturing, ingredient, and processing market continue to mature, with substantial acquisitions and key product announcements to follow. With the acquisition of UBM, the enlarged company now enjoys depth in a range of specialist markets with an international balance and reach. This helped the group to provide a further period of growth in revenues, adjusted operating profit and net profit. The company continues to grow consistently in Events and Exhibitions despite headwinds in its Fashion and Middle East businesses. Data, Information and Communities businesses are performing well, and the Advanced Learning businesses remain resilient.

Based on the decent prospects and supported by valuation undertaken using the above two methods, we have given a “BUY” recommendation at the current price of GBX 743.60 (as on 24th February 2020 before the market close at 9:36 AM GMT) with lower double-digit upside potential based on 12.70x NTM EV/EBITDA (approx.) on FY20E EBITDA (approx.) and 16.65x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.). 
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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