ii view: Informa expects sixth consecutive year of growth

Exhibitions group battles challenges in Hong Kong and Dubai but maintains full-year guidance.

10-month trading update to 31 October 2019

• Underlying revenue growth of 2.8% (10 months 2018: +3.9%)
• Maintained full-year guidance for revenue growth of 3.5%

Chief executive Stephen Carter said:

"After ten months trading in 2019, despite an unpredictable economic/geo-political backdrop, the enlarged Informa group continues to demonstrate resilience and performance, remaining on track for a sixth consecutive year of growth in underlying revenue, profit, adjusted earnings and cashflow."

ii round-up:

Exhibitions, events, information services and scholarly publishing company Informa, reported a year-on-year decline in revenue growth for the first 10 months of 2019. 

Adjusted or underlying revenue growth of 2.8% was down on 3.9% in 2018, hindered by disruption to its September Hong Kong Jewellery & Gem Show and challenging market conditions in Dubai hindering client spend for its Cityscape Global property & construction event. 

However, and with November and December significant trading months representing around 20% of annual revenue, management's full-year expectation for revenue growth of 3.5% was maintained.  

In June 2018, Informa completed its acquisition of rival UBM and former owner of Channel 5 for £3.8 billion. The combined group organises over 500 exhibitions each year and employs over 11,000 staff in more than 30 countries. 

Informa, which operates across five divisions, also strengthened its balance sheet, issuing a new €500 million bond to lower its overall cost of debt and extend the average maturity to 5.5 years.

The share price was little changed in late morning UK stock market trading. 

ii view:

Informa's diverse business and solid track record have helped underpin investor confidence, having already completed its integration of UBM. The expected achievement of a sixth consecutive year of growth in underlying revenue, profit, adjusted earnings and cashflow underlines its respectable performance history. 

For investors, a forward price/earnings (PE) ratio in line with the three-year average and above the 10-year average offers some caution, as does a 25%-plus rally in the share price year-to-date. But despite specific geographical challenges, management confidence in the full-year outcome remains. A forward dividend yield of close to 3% and covered more than twice by earnings also provides a degree of share price support. 

Positives: 

• The purchase of UBM has given it a reach in Asia that it did not previously have
• The dividend payment has been increased for ten consecutive years

Negatives:

• The valuation (price earnings ratio) is above the ten-year average
• Return on equity at 12.9% is below the three-year average of 19.1%

The average rating of stock market analysts:

Buy