Does Informa offer an informed choice for investors?

Informa is as one of those rare event companies that not only withstood the challenges of the pandemic but also emerged from it in an even stronger position.
The FTSE 100 group suffered a £1 billion loss in 2020, with its shares falling as low as 360p. In the space of four years, however, its sales, profits and margins have almost completely recovered, and with a larger, more focused portfolio of businesses to boot.
Informa, formed in 1998 via the merger of IBC Group and Lloyd’s of London Press, is the largest organiser of trade shows in the world, including the Fort Lauderdale International Boat Show, Pharmapack Europe and Arab Health. It makes most of its money by hosting trade conferences, both in-person and online.
Last year, half its £3.2 billion of revenue came from Informa Markets, a transaction-focused events business. About £581 million came from Informa Connect, the division for content-led live and on-demand events, and just under £400 million from Informa Tech, where it offers business-to-business digital services.
The group also includes Taylor & Francis, an academic publishing business, which generated £619 million in revenue, although this does not usually attract much attention from investors, given the low-growth nature of the market.
Informa garnered headlines this summer after it agreed to buy Ascential, its London-listed rival and the owner of the Cannes Festival, in an all-cash deal for £1.16 billion. It came barely a year after Informa acquired Tarsus Group, another events business, for $940 million, which expanded its presence in Asia, China, the Middle East and the Americas. The group also merged its technology division in a $350 million deal with TechTarget, and sold the Pharma Intelligence division for £1.9 billion in 2022.
This more concentrated approach has paid off, at least so far. Last month Informa increased its annual forecasts, after reporting double-digit growth in the first six months of the year. Organic revenues were up by 11 per cent to £1.7 billion and its adjusted operating profit rose by 13 per cent to £467 million. The business thinks it can now deliver operating profit of up to £1 billion by December thanks to strong sales and a focus on rebuilding its adjusted operating profit margin, which has improved from 10 per cent three years ago to 27.5 per cent.
That said, Informa’s recent growth has been expensive. Net debt hit £1.7 billion in June, about £500 million higher than at the same point last year, and its leverage ratio (of net debt to adjusted cash profits) has risen to a multiple of 1.6, from 1.2. This is partly down to the company’s share buybacks, having returned £1.5 billion to investors since divesting the intelligence business two years ago. The stock also pays a dividend, with an expected forward yield of 2.4 per cent.
There are strong structural growth opportunities for Informa, not least from its partnership with artificial intelligence-driven businesses. In the spring the company struck a deal with Microsoft worth more than $10 million, which will give access to its data to improve the American technology group’s AI systems. The data access agreement, which will run until 2027, means that Informa can also extend the use of AI within its own business, as well as highlighting the value of niche areas of business-to-business intellectual property to other potential partners.
This column last rated Informa as a “buy” in November, with the shares since then having risen by roughly a tenth. The stock now trades at 16 times forward earnings, at a significant discount to its five-year average of 25.4 and offering decent value. Analysts at Shore Capital, the broker, believe that earnings per share and dividend per share should be able to grow at a annual compound rate of 10 per cent and 12 per cent, respectively, over the next three years. Advice Buy Why More concentrated, growing business
Most income investors are content with a stock that can reliably pay a dividend yield north of 4 per cent. A yield higher than 10 per cent should set off alarm bells, including for investors in Liontrust Asset Management, where a decline in the share price has pushed up the forward yield on the stock to 12.5 per cent.
Liontrust, founded in 1994 and based in London, is an investment management company with customers in Britain, Europe, Canada and Australia. Investors who buy Liontrust funds have been withdrawing their money, as sentiment towards its core strategies, in areas such as British stocks and small and mid caps, has suffered.
The asset manager suffered an operating loss of £1.8 million for its 2024 financial year that ended in March, compared with a £49 million profit in the year before. Most of this was because of a sharp fall in its assets under management, down by almost 12 per cent to £27.8 billion.
Liontrust, like many other British asset managers, is stuck between titans such as BlackRock, which thanks to its enormous scale can charge much lower fees on passive funds, and specialist funds that can justify higher costs in under-researched corners of the market. Meanwhile, the appetite for active management in British stocks has waned.
Its shares, which have dropped by almost 75 per cent in three years, have been further hampered by its failed attempt to acquire GAM Holding. The bid resulted in millions of pounds in related costs, on top of separate restructuring costs for other acquisitions.
The shares trade at a lowly 8.5 times forward earnings, slightly below its peers Jupiter, Premier Miton and Polar Capital, where multiples stand between 11 and 12. Consolidation is probably the name of the game if British asset managers want to survive.
Reports this year suggested that Liontrust was in early discussions with Artemis, its smaller rival, about a possible tie-up. If institutional sentiment towards the British stock market does not improve significantly, a deal of this kind may prove to be the best way forward for shareholders.Advice Hold Why Await next wave of consolidation in the market