ii view: confident Informa does AI data deal with Microsoft
Conducting business in countries such as India and China and with a focus on shareholder returns. Buy, sell, or hold?
8th May 2024 15:01
by Keith Bowman from interactive investor
Trading update from 1 January to late April
- Now expects full-year 2024 revenues at the top end of its prior £3.45-£3.5 billion range, up from £3.19 billion in 2023
- Now expects annual adjusted profit to be at the top end of its prior £950-£970 million range versus £854 million in 2023
Chief executive Stephen Carter said:
“All Informa's businesses are performing ahead or in line with 2024 targets, delivering growth and momentum which sees us delivering at the upper end of guidance range.
“Our business is in growth, it is expanding, and we see lots of opportunities ahead.”
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ii round-up:
Academic and business research publisher Informa (LSE:INF) today raised its full-year sales and profit forecasts given buoyant early year trading as well as detailing an increase in its planned share buyback programme.
A new artificial intelligence (AI) partnership with Microsoft Corp (NASDAQ:MSFT) feeds into management expectations for annual 2024 sales and profits at the top end of prior forecasts of £3.45-£3.5 billion and £950-£970 million respectively. A further £160 million takes planned 2024 share buybacks to a total of £500 million.
Shares in the FTSE 100 company rose 2% in UK trading having come into this latest news up around 8% year-to-date. That’s similar to scientific and business publisher RELX (LSE:REL) and broadly in line with the FTSE 100 index itself so far in 2024.
Informa operates across the four divisions of Markets, or exhibitions; Connect, organising on-demand experiences and seminars; Tech, specialising in technology company clients; and specialist knowledge research publisher Taylor & Francis.
A new partnership with Microsoft provides the tech giant with access to Informa’s advanced learning content and data allows Informa to use Microsoft’s AI expertise to improve its own productivity. Microsoft will pay Informa both an initial data access fee of around $10 million along with recurring payments over the next three years.
Earlier in 2024, Informa detailed plans to combine its Informa Tech business with US marketing firm TechTarget, taking a 57% stake in the new entity named New TechTarget, which will be listed on the Nasdaq. The listing remains on track for Q4 2024.
Two new executive appointments announced were for Penny Ladkin-Brand, formerly of Future (LSE:FUTR), to become head at its Taylor & Francis division and Jill Dougan of Centrica (LSE:CNA) as the group’s new marketing head.
Broker UBS reiterated its ‘buy’ stance on the shares post the update.
ii view
Founded in 1998, Informa’s services today help businesses to connect and make better informed decisions. Markets, organising transaction oriented (B2B) events and the biggest exhibition organiser globally accounts for half of group sales, followed by publisher Taylor & Francis at 19%, Connect at 18% and Informa Tech the balance of around 12%. Geographically, North America generates 48% of sales with China another key market at 14%.
For investors, both economic and geopolitical tensions should not be ignored. Group net debt rose in 2023, costs for businesses generally remain elevated, while a forecast dividend yield of around 2.4% is less than the 4.5%-plus estimates for media rivals WPP (LSE:WPP) and ITV (LSE:ITV).
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On the plus side, Informa enjoys diversity of both business type and geography. The listing of its Informa Tech business should offer a more market oriented valuation, a net debt-to-adjusted profit ratio of 1.4 times remains within management’s comfort levels, while increasing profits and cashflows underpin shareholder returns via share buybacks.
For now, and despite ongoing risks, a growing business, clever deal-making and consensus analyst fair value estimate above 950p looks to offer grounds for continued long-term optimism.
Positives:
- Diversity of businesses
- Ongoing share buybacks
Negatives:
- Uncertain geopolitical global backdrop
- Exposure to currency moves
The average rating of stock market analysts:
Buy
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