The tenure of Lord Carter of Barnes in the jargon-ridden corridors of the media regulator Ofcom has clearly been influential. Last summer he announced a grandly titled “growth acceleration plan” at Informa, the media group he runs, at a cost of £30 million or more over each of the next three years.
Informa’s 2014 figures are riddled with mentions of this, but it mainly seems to involve investing in product improvement, innovation and people, which is the sort of thing that businesses should be doing all the time.
The former Stephen Carter, though, says that this was not a sufficient priority under the old management, which preferred to grow by acquisition.
As part of this programme, Informa has pledged to increase dividends by at least 2 per cent a year until 2017. The payment for last year is duly raised by that amount, which offers the shares, up 12½p at 528p, the support of a yield near 4 per cent.
The actual numbers were flat, both in terms of revenue and operating profits, which fell by about £600,000 to £334.1 million. Much of this was the effect of strong sterling, and they would have been up by about 5 per cent at constant currency rates.
Within the four divisions, exhibitions was the standout, real profit growth running at 18.2 per cent, and this division has been added to by two acquisitions that give the company a stake in the US market, the world’s largest.
The laggard is business intelligence, which will be the subject of further surgery. A Chinese pharma venture has been discontinued, and various businesses providing undifferentiated consumer information may be sold, leaving more detailed must-have data. Informa reckons the division should be back to growth by the end of this year.
I chose Informa as one of my picks for 2015 because I thought the markets would begin to appreciate this new focus by management. The shares are up by 14 per cent this year.
Further gains in earnings are promised, and, indeed, it would be hard to see how these cannot be achieved, given the benefits of a weaker pound and the restructuring so far. The shares sell on nearly 14 times earnings but should have farther to go.
Revenue £1.14bn
Dividend 19.3p
Free cashflow for 2014 £232.5m
My advice Buy
Why Market is beginning to appreciate the restructuring being carried out but there is farther to go, especially in the business intelligence division
In terms of prospects for this year, Morgan Advanced Materials is in a similar place to Informa, seeing the inevitable effects of the weaker pound against the dollar and dollar-related currencies compounded by the benefits of earlier reorganisation.
This is the old Morgan Crucible, now focused on a portfolio of more advanced industrial products and having exited businesses with annual revenues of £40 million to £50 million that did not make the necessary returns.
This has involved a fair bit of financial adjustment, and the 2014 figures contain another raft of below-the-line exceptionals, though we are promised these will be kept to a minimum in future. Underlying profits are up by almost 4 per cent to £112.4 million, though again there is a sterling effect and at constant currency rates they would have been 12 per cent higher.
Morgan sells into different markets and inevitably these are moving in different directions. So North America was mixed, Europe slow and Asia and the Middle East strong, and it is into these last areas that future investment is being directed.
The company has nothing obvious
quoted in the UK against which it can be compared and claims to have avoided the mistakes made by some overseas competitors. This year pre-tax profits are expected to grow from £91.6 million to about £105 million.
The shares have come up from about 260p in the autumn and added a further 11¾p to 313¾p yesterday. They therefore sell on about 13 times earnings. That sounds about right, given the markets Morgan serves, and does not warrant a buy.
Revenue £922m
Dividend 10.9p
My advice Avoid
Why Rating on shares looks up with events
There should have been no huge surprise that Imperial Tobacco would be raising dividends for the year to end-September by 10 per cent. The company has been increasing payments that way for some years and will continue to do so.
First-quarter trading was pretty much in line with previous performance and with market trends as a whole as people smoke less for economic or health grounds. Total volumes were off by 4 per cent, hit by the timing of price increases, falling volumes in Iraq and lower sales of mass market cigars in the US before a brand relaunch. All this left underlying tobacco revenues off by 1 per cent.
Imperial is pushing ahead with its policy of targeting marketing spend on its growth brands, where revenues were up by 15 per cent, and bearing down hard on costs. It is awaiting regulatory clearance of its purchases of various brands in America arising out of the merger of Reynolds American and Lorillard, which is expected in the spring.
The shares edged ahead 34p to £30.66 on those reassuring noises. That dividend promise puts them on a forward yield of 4.6 per cent, the main reason to hold them.
Fall in tobacco volume 4%
My advice Hold for income
Why Imps is committed to providing good dividend yield
And finally ...
The pricing of shares in John Laing has come in right at the bottom end of the 195p to 245p indicated range. Interest from retail investors was stronger than expected, and about a fifth of the shares went to them. I suspect the uncertain markets depressed the appetite of institutional investors. That low price makes the shares more attractive to retail. Laing has a hybrid dividend policy: a yield of 2.8 per cent is assured, and the distribution of 10 per cent of the proceeds of future sales pushes that yield up to an expected 4.2 per cent.
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