Informa Plc was incorporated in the year 1998 and operates in the field of business intelligence, academic publishing, knowledge & networking, and global events & exhibitions. The business operations spread across the geographies like the United States, North America, Continental Europe, and the United Kingdom. Company’s Academic Publishing segment engaged in providing books and journals in print and electronic format as well. The Business Intelligence segment facilitates intelligence and insight to professionals. Its global exhibition division vertical engaged in providing business to the business 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.

Key Statistics


Recent Developments
On March 07, 2019, Informa Plc reported its full-year financial year results for the 12 months ended on 31-Dec-2018. On February 01, 2019, Company announced it had divested the Life Science Media Brands Portfolio for a total consideration of $100 million. On January 31, 2019, MJH Healthcare Holding Plc acquired UBM Plc Media assets for US$100 million. On Sep 16, 2018, Informa Egypt LLC acquired Sahara Expo.

Key Managerial People
Mapp Derek – Independent Non-executive Chairman of the Informa Plc board.
Carter Stephen A. – Informa Group’s Chief Executive, Executive Director.
Wright Gareth – Group Finance Director, executive director.

Top shareholders

(Source: Thomson Reuters)
 
Financial Performance – (FY18 vs FY17)


(Source: Company annual report FY18)

Since completion of 2014-2017 growth acceleration plan, Company has delivered a fifth consecutive growth in the top-line, adjusted profit after tax, adjusted earnings and cash flow. During FY18, adjusted revenue surged by 34.9% to £2,369.5 million, adjusted operating profit surged by 34.4% at £732.1 million. During the financial year 2018, statutory operating profit accelerated by 5.4% at to £363.2 million. The surge in the amortisation expenses was primarily because of the acquisition of an intangible asset in connection to the UBM acquisition. Acquisition costs of £42.9 million including £41.1 million of costs related to the acquisition of UBM. In FY18, Global exhibition segment underlying revenue grew by 6.7% to £575.8 million, and underlying adjusted operating profit surged by 6% to £200.1 million. Academic Publishing segment underlying revenue increased by 2.2% to £533.2 million, and underlying adjusted operating profit surged by 0.3% to £198.4 million. Business Intelligence vertical underlying revenue for FY18 stood at £385.6 million, an increase of 2.6% compared with FY17 performance and underlying adjusted operating profit surged by 0.9% to £91.1 million. Knowledge and Networking business underlying revenue improved by  11% to £261.4 million and underlying adjusted operating profit surged by 5.5% to £39.9 million. In FY18, revenue from UBM segment stood at £613.5 million and statutory operating profit stood at £30 million. During the financial year ended 31-Dec-2018, finance cost surged by £12.4 million to £64.2 million on account of additional debt borrowed to finance the UBM acquisition. Adjusted earnings for FY18 stood at £519.8 million, reported an increase of 36.6 compared with FY17 earnings of £380.4 million. The average number of shares increased by 28.0% during the FY18.  Diluted adjusted earning per share stood at GBX 49.2, improved by 7.0% compared with the FY17 earnings of GBX 46.0.


(Source: Company annual report FY18)
 
Dividend
In FY18, Company paid a dividend of £201.9 million to the external shareholders as compared with £162.0 million in FY17 and £8.6 million of dividend to the non-controlling shareholders during FY18. On 28 June 2018, the company announced a special dividend of £59.0 million post-acquisition of UBM to the former shareholders of the UBM. Company maintained a progressive dividend policy, with dividend growth in line with the earnings on a year-on-year basis. Post strategic expansion in the United States since 2014, US dollar revenue and costs weigh higher in the books of Informa Plc. For FY18, the group's net capital expenditure stood at £59.4 million as compared with £79 million in FY17, declined on a year-on-year basis, that reflects the end of growth acceleration plan investment.

Stock Performance – 1 Year

 Daily Chart as at Mar-11-19, before the market close (Source: Thomson Reuters)

Commentary
Informa Plc outstanding market capitalisation of £9.1 billion ranks it among the top mid-cap stock listed on the London Stock Exchange. At the time of writing (as on 11-Mar-2019) shares of Informa were quoting at GBX 721.80, reduced by 1.60 points or 0.22% against its previous day closing price. During the last one-year period, shares have registered a 52w high of GBX 869.60 and a 52w low of GBX 602.80 respectively, and at the current market price, its shares were trading 16.9% below its 52w high and 19.7% above its 52w low. In the last one-year time period, stock has delivered a return of 1.71% but shot up by 14.82% on a year-to-date basis (as at Mar-08-19). Stock's Beta of 0.78 makes it less volatile against the benchmark index. It indicates a low correlation between the stock and index in terms of price movement. Company's gross dividend yield stood at 4.10% which is relatively very higher as compared with the peers' dividend yield. Also per share dividend payment has increased gradually with the growth in the top-line and bottom-line of the company. At a Simple Moving Average (SMA) standpoint, the shares of Informa plc were trading above its 30day and 60day moving average but marginally lower against its 200d moving average. In percentage terms, shares were trading 3.03% above its 30d SMA price, 7.48% above its 60day SMA price and 1.93% lower against it 200 day SMA price respectively. At volume front, 5-day average daily volume was 33.35% higher against the 30day average daily volume traded on the London Stock Exchange.
 
Financial Ratios and Valuation


As we can see in the above financial ratios table that the company has delivered an EBITDA margin above 30% for the last three years, which indicates the operating efficiency of the group. Also in FY18, company's performance in terms of EBITDA margin was considerably above the industry peers median performance which reflects a competitive advantage for the group within the industry. At Net Margin standpoint as well group's performance is relatively higher than its peers median. In FY18, the company reported a 150bps higher net margin at 9.4% compared with the industry median of 7.9% for the same period. Although, return on equity (ROE) plunged during FY18 on account of acquisitions the company made during FY18, however going forward company has the potential to improve its ROE. At leverage standpoint in terms of debt/equity ratio, the company is relatively high leveraged as it has borrowed new debt to finance the acquisition of UBM in FY18. For FY18, debt/equity ratio stood at 0.48 which is almost double of the industry median of 0.28. Net Debt to EBITDA ratio rose at 2.56 in FY18 compared with 1.16 of industry median. Company's liquidity position, in terms of the current ratio of 0.47 for FY18 stood below the industry median of 0.94 but improved marginally against FY17 current ratio of 0.41. This ratio measures the company's ability to meet its short-term liabilities, the higher the ratio, the better the liquidity position.
 
Valuation Methodology
Method 1 – EV/Sales Multiple Approach


While valuing Informa Plc on EV/Sales multiple, we have considered NTM EV/Sales(x) of its Peers which were Daily Mail and General Trust Plc (NTM EV/Sales of 3.3x), WPP PLC (NTM EV/Sales of 3.9x), Ascential PLC (NTM EV/Sales of 4.6x), Wolters Kluwer NV (NTM EV/Sales of 4.4x) and ITV PLC (NTM EV/Sales of 3.9x) respectively
 
Method 2 – Price/Cash Flow Multiple Approach (Cash Flow Per Share (FY19E) approximately)

Note: All forecasted and peers have been taken from Thomson Reuters.

Growth Prospects
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 FY19.  We also estimate the return on equity to improve in FY19, 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.

Key Risks
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
Informa Plc has strong fundamental and financial strength. As the company has completed its growth acceleration plan, future prospects look promising. Also, we estimate the return on equity will improve in coming years and margins will increase further. Based on the valuation done using the above two methods we have given a BUY recommendation at the closing price of GBX 723.6 (as on Mar 08, 2019) with single digit upside potential based on 4.18x NTM Peers Average EV/Sales on FY19E Sales and based on 13.8x NTM Price/Cash Flow on the FY19E Cash Flow per share respectively.
 
*The buy recommendation is valid for the current price as covered in the report (as on 11th March 2019).

Note- GBp or GBX are interchangeably used for Pence Sterling. 

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