Interactive Investor

ii view: Informa on the rise after terrible year for events

6th January 2021 16:03

Keith Bowman from interactive investor

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Shares in this events organiser are down a third over the last year but hope is on the horizon.

Full-year 2020 trading update

Chief executive Stephen Carter said:

"The Informa Group enters 2021 with an intention to use the progressive return from Covid-19 to deepen our use of digital and data services, thereby ensuring our products and brands remain relevant in a post pandemic world. The continued strength and growth of our subscription businesses and our prior decision to extend the physical Events Postponement Programme should serve us well as markets gradually open up and customer confidence recovers in the latter half of 2021. Equally important, will be our continued commitment to strengthening our digital and data capabilities."

ii round-up:

Media and events company Informa (LSE:INF) today left investors breathing a sigh of relief as it detailed pandemic hit 2020 trading in line with its already lowered estimates.

It also flagged expected positive cash flow from the first quarter of 2021, given a combination of effective cost management, efficient financing and robust subscriptions.

Informa shares rose by more than 6% in UK trading, leaving them down by around a third over the past year. Shares for fellow media companies WPP (LSE:WPP) and Euromoney Institutional Investor (LSE:ERM) are down by 22% and 15% respectively. 

The global pandemic and cancelled events, such as the Monaco Yacht Show, are expected to cut 2020 operating profit by more than 70% versus 2019 to between £250 million and £270 million.  

But the company did host more than 500 virtual events of different shapes and sizes through 2020, enabling it to accelerate its digital product development programme. For now, however, management thinks 2021 will likely be a year when physical events start to return, rather than see a full rebound and recovery. Events accounted for around 65% of 2019 overall sales.

More favourably, its selection of subscription-led, specialist knowledge and information businesses continued to perform well through 2020. Many are now in mid-renewal season with strength in both renewal rates and annualised contract values currently being seen.

There is no overall guidance for 2021. Full-year 2020 results are scheduled for 22 April, over a month later than in 2020, potentially allowing more time for the rollout of vaccines and for its events schedule to build.

ii view:

Informa organises international exhibitions and events, and provides information services and educational publishing. Its services help businesses to connect and make better informed decisions. At the end of 2019 it boasted a record of six consecutive years of growth in underlying revenue, profit, adjusted earnings and cashflow.

But the global pandemic and social distancing have severely disrupted its events related businesses. Expected overall group revenues for 2020 of between £1.65 billion and £1.68 billion contrast with a total of nearly £2.9 billion in 2019.

For investors, ongoing Covid uncertainty and its impact into 2021 should not be ignored. Adjusted profit estimates for 2021 remain understandably wide, while the dividend is currently suspended. But the rollout of vaccines now offers hope. Informa’s solid track record also gives reason for some longer-term confidence. In all, and while some caution remains sensible, existing fans of the company are now likely to be adding to existing holdings. 

Positives: 

  • Subscription sales proving resilient
  • A previously strengthened balance sheet

Negatives:

  • Suspended dividend payment
  • Uncertain outlook for events business given the pandemic

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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