ii view: Informa finally revives the dividend

Shares in this media company are up year-to-date versus falls for the broader market. We assess prospects. 

First-half trading update to 30 June

• Expects underlying revenue growth of 40% plus
• Reiterated full year expectations at the top end of its previous forecast

ii round-up:

Media company Informa (LSE:INF) has reiterated expectations for full-year profit towards the upper end of its previous forecast, as it continued to rejig its business portfolio and announced plans to resume dividend payments after a two-year hiatus. 

Adjusted profit for the year until the end of December is expected to come in at the upper end of its March forecast of between £470 million to £490 million. An interim dividend of 3p per share is also planned as a debt of £1.9 billion this time last year has turned into net cash.  

Informa shares rose by more than 4% in UK trading having come into this latest news up around 4% year-to-date. Shares for fellow conference events organiser RELX (LSE:REL) are down by around 5% during 2022, while education publisher and bid target Pearson (LSE:PSON) is up by a quarter. 

• Are these six fallen mid-caps now good value?
• How to invest for difficult times
• How this investor is fighting fear amid market turbulence

Along with organising exhibitions and events via its markets division, FTSE 100 company Informa also provides information services and scholarly publishing.

A return to live and on-demand events following the pandemic has been great for the events business, and first-half group revenue to the end of June is up 40%. 

The purchase of specialist content and audience development company Industry Dive for $389 million was accompanied by a $193 sale of its non-core fund flow business EPFR. 

Broker Morgan Stanley noted that Informa’s portfolio restructuring is yielding higher proceeds than expected, allowing it to reinvest in faster-growing digital B2B events businesses while returning capital to shareholders. A £725 million share buyback programme remains ongoing. The broker reiterated its "overweight" stance, upping its estimated fair value price target to 730p. 

First-half results are scheduled for 28 July. 

ii view:

Prior to the pandemic in 2020,  the company boasted a record of six consecutive years of growth in underlying revenue, profit, adjusted earnings and cashflow. 

For investors, a cocktail of elevated inflation, rising interest rates and heightened geopolitical tensions offer a tough backdrop. Rising costs broadly for business and industry generally warrants consideration. So does an estimated price/earnings ratio above the 10-year average, suggesting the shares are not necessarily cheap.  

More favourably, a recovery for its events business from the pandemic is clearly assisting and a rejigging of its business portfolio remains ongoing. The balance sheet has been strengthened, while a return to dividend payments is clearly a significant decision. In all, and with the consensus analyst estimate of fair value sat at over 680p per share, reason for longer-term optimism looks to persist.

Positives: 

• Readjusting its business portfolio
• Strengthened balance sheet

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Buy