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TEMPUS

Informa not making an exhibition of itself

The Times

Just because it’s big doesn’t mean it’s going to get noticed. Informa is a heavyweight beast of the FTSE 100 that weighs in with a market value of £10 billion, but its activities — even multibillion-pound takeovers — seem to slip under the radar among so much other hubbub.

It’s not even that it’s a boring company: its portfolio of businesses includes such august names as Routledge, the academic publisher, Lloyd’s List, the bible of the shipping world, and Datamonitor, the market and data research company.

We might leave aside that it also includes exhibitions and events including World of Concrete, but suffice it to say that its markets — of events, exhibitions, specialist publishing and data, all with an increasing bent towards technology — are in growth mode. Just because it’s little noticed, though, prospective investors shouldn’t presume that the shares will necessarily be a bargain.

Informa’s history has been built on acquisition. Although parts of its stable date back to the early 18th century, the group was created in its modern form in 1998 via the combination of IBC Group and Lloyd’s of London Press.

Having bought up a string of companies, including Datamonitor, Taylor & Francis, the publishing house, and Penton Information Services, an American exhibitions business — joining the FTSE 100 along the way in 2016 — last year it bought UBM, its biggest acquisition yet, in a £3.8 billion cash-and-shares deal. A year on from that deal, Informa seems to have slotted UBM into the group well, carrying out some minor housekeeping disposals as part of the process, including offloading some life sciences media brands to an American buyer for just over $100 million.

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It also has changed its reporting structure, operating as five divisions rather than four. This involved the creation of a technology unit into which it put telecoms, media and telecoms brands that it received under an asset-swap deal sealed with IHS-Markit, the data company, this year.

At its heart, Informa’s expertise lies in specialist and niche areas — in publications for the medical professions, say, as well as exhibitions and events targeted at the fields of maritime or beauty — and, yes, construction design experts and commercial contractors with World of Concrete.

The competitiveness and relative maturity of its main markets mean that this is not a company that does double-digit growth, but the expansion it does achieve it does so reliably. Underlying revenues grew by 2.8 per cent over the ten months to October 31 and the group is confident that it will hit its target of 3.5 per cent growth for the full year.

If that sounds like a herculean task, bear in mind that November and December are busy months for Informa, generating 20 per cent of its revenue through annual subscription renewals and several big events, including AI Summit shows in Cape Town and New York.

Informa’s share price is more erratic. The stock shed a fifth of its value last year, mainly as a result of a share issue used to part-fund the UBM acquisition. Having recovered its lost ground since January as the success of the integration took effect, the shares have fallen again, buffeted by wider worries such as the US-China trade war.

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The shares, up 2¼p, or 0.3 per cent at 802¼p yesterday, have gained 10 per cent since this column advocated holding them at the beginning of March, which is perfectly credible. They trade on a reasonable multiple of 14.9 times concensus forecast earnings and offer a dividend yield of about 3.1 per cent. Investors should hold on and wait for further improvement.
ADVICE Hold
WHY
Despite recent weakness, the shares have gained ground over time and should have further to go

Renewi

It’s a safe bet that Renewi would happily recycle its present share price into something more productive. The waste reprocessor’s stock went into a giddy descent at the beginning of last year, when the Dutch regulator froze activities at its profitable treated soil plant at Moerdijk in the Netherlands, and it has been in the doldrums ever since.

Despite a move to re-engineer the facility for alternative uses, as well as signals from the regulator that it is minded to relax its grip on the site and others in the Netherlands, investors are waiting for evidence of success before they will move the share price.

Renewi was created in 2017 when Shanks, a British company, took over Van Gansewinkel Groep, of the Netherlands, for €482 million. It has contracts with councils in Britain, but about 90 per cent of its business is carried out in Belgium and the Netherlands, both of which have a highly developed approach to recycling.

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ATM, the Dutch plant, takes contaminated soil — stained with oil, for example — and cleans it for use in roadbuilding and on industrial sites. Renewi receives a fee for taking the soil, but makes nothing from passing on the cleaned goods.

When the Dutch regulator suspended the use of the processed soil, it cut ATM’s operating capacity by 70 per cent and its operating profit by between €2.5 million and €3 million a month. Because it cannot pass on the soil it has cleaned, Renewi is running out of space to put it. However, it believes that it will receive approval to increase production again next year.

In the meantime, it has adapted ATM so that it can separate the soil into gravel, sand and filler, each of which can be used in other areas, such as making cement and asphalt, for which Renewi does receive payments. Analysts reckon that over time it can generate a similar operating profit from new activities to those before the ban.

Renewi’s future is made of highly uncertain stuff, hence a share price down 73 per cent since January 2018. The shares, down 0.2 per cent at 28½p, trade for 7.4 times Peel Hunt’s forecast earnings and yield 5.2 per cent. Unfortunately, as it stands they are too much of a risk.
ADVICE Avoid
WHY Operating uncertainty and debts are too high

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