Informa Plc

Informa PLC (INF) is a London, United Kingdom-headquartered international events, intelligence and scholarly research and publishing group which deliver intelligence-based products, data-driven services and research for specialist customer communities in more than 30 countries. The group is a constituent of the FTSE 100 index. The operations are differentiated in five operating segments: Informa Markets, Informa Intelligence, Informa Tech, Informa Connect and Taylor & Francis.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

Due to favourable tailwinds from currency movements and the full period of contribution from UBM, which the company acquired in 2018, the company delivered 47.1% reported growth and +3.4% underlying growth in revenue to £1,407.6m. Statutory operating profit increased by 65.5% to £248.3m and adjusted operating profit grew by £141.3m or 48.0% on a reported basis to £435.7m, with underlying growth was 8.2%. Statutory profit before tax rose to £232.8m from £118.7m in H1 FY2018, while adjusted profit before tax was £377.8m against £264.7m in H1 FY2018. Adjusted diluted EPS declined by 5.7% to 23.2p from 24.6p 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, and statutory diluted earnings per share increased by 42.2% to 14.5p. The company recommended an interim dividend of 7.55p per share (H1 2018: 7.05p per share), which represented a 7.1% increase in the interim dividend in the prior period and was in line with the aim to grow dividends broadly in line with adjusted earnings.

Valuation Methodology
Method:  Price/Earnings Approach (NTM)


Share Price Commentary

Daily Chart as at July-24-19, before the market closed (Source: Thomson Reuters)
 
On 24 July 2019, at the time of writing (before the market closed, GMT 10:30 am), INF shares were trading at GBX 875.6, up by 5.86% against the previous day closing price. Stock's 52 weeks High and Low is GBX 885.6/GBX 602.8. The company's stock beta was 0.81, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £10.38 billion, with a dividend yield of 2.65%.

Conclusion
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 deliver a further period of growth in revenues, adjusted operating profit and net profit, free cash flow, which supported the ongoing commitment to attractive and increasing dividendswith a 7.1% growth in interim dividends per share. The company continues to grow consistently in Events and Exhibitionsdespite headwinds in its Fashion and Middle East businesses, its Data, Information and Communities businesses are performing well, and the Advanced Learning businesses remain resilient. In many individual markets, the company operates close to its customers, whichprovides 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.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the closing price of GBX 827.00 (as on 23 July 2019) based on 17.88x NTM Price/Earnings (approx.) on FY19E Earnings per share (approx.).

Croda International Plc

Croda International PLC (CRDA) is an East Yorkshire, United Kingdom-headquartered chemical company that creates, manufactures and markets speciality chemicals for a range of diverse products including health and beauty, engine lubricants, plastics and many more. The group targets industries and consumers worldwide to offer solutions to customer and market needs and is continuously investing in existing markets and expanding into emerging markets. The operations of the group are differentiated in four operating segments: Industrial Chemicals, Performance Technologies, Life Sciences and Personal Care.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

Sales at reported rates increased by 1.7% to £714.7m(H1 FY 2018: £702.8m) while it declined by 1% on constant currency basis, reflecting a 30 basis points decline in return on sales to 25.1%. Sales in the Core Business rose to £657.9m (H1 FY 2018: £642.2m), up by 2.4% in reported currency and contracted by 0.4% in constant currency due to increased macroeconomic uncertainties and the trade dispute between China and the US. Adjusted operating profit rose by 1.1% in reported currency basis to £179.3m (H1 FY 2018: £177.4m) and remained flat in constant currency, while adjusted profit before tax reduced by 2.5% in reported currency basis to £170.6m (H1 FY 2018: £175.0m) with a 3.5% decline in constant currency basis. Profit before tax on an IFRS basis decreased by 2.7% to £166.2m (H1 FY 2018: £170.8m), and IFRS basic EPS decreased by 1.9% to 95.6p (H1 FY 2018: 97.5p). Adjusted basic earnings per share declined by 2.0% to 98.2 pence, and the company increased the interim dividend by 3.9% to 39.5 pence (H1 FY 2018: 38.0p).

Share Price Commentary
 
Daily Chart as at July-24-19, before the market closed (Source: Thomson Reuters)
 
On 24 July 2019, at the time of writing (before the market closed, GMT 12:35 pm), CRDA shares were trading at GBX 4,602, down by 4.64% against the previous day closing price. Stock's 52 weeks High and Low is GBX 5,460.00/GBX 4,499.12. The company's stock beta was 0.75, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £6.23 billion, with a dividend yield of 1.85%.

Conclusion
Driven by the strength of Health and Crop Care platforms, the company reported a strong performance in Life Sciences, which rose by 13% and recorded return on sales of 30.6%, helping the company to report a resilient performance in challenging market conditions. The company expects Life Sciences to show continued progress, and the company boasts a strong pipeline and robust business model, helping cash generation to improve. The company expects a slight improvement in financials in the second half of the year against the prior year and enjoys opportunities for investment for future growth and returns due to low leverage and strong cash generation. However, Personal Care and Performance Technologies, which account for the majority of sales, are expected to remain subdued due to challenging economic and political conditions. Customers became much more cautious in their purchasing due to the trade dispute between China and the US significantly impacting Personal Care market in the US and North Asia. Moreover, slower end markets in automotive and polymers affected the market for Performance Technologies, and the recent global data does not augur well for the segment. The company is trading near its 52-week lows which indicates that invertors’ sentiment about the stock is not very positive. Due to this, we recommend investors to keep a “Watch” on Croda International Plc stock at the closing price of GBX 4,826 as on July-23-19, while we look for any upcoming catalysts.
 
*The buy recommendation is valid for the current price as covered in the report (as on July-24-19).
*All forecasted figures and peers have been taken from Thomson Reuters.

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