The pandemic triggered many changes in our working lives. Among the biggest has been the reduced face to face interaction, replaced by Zoom calls and remote work. Sometimes, it gets tiring. Whenever I now meet a client or company face to face it feels refreshing and exciting. I enjoy a more free-flowing conversation and to see the body language of my counterpart. Even the small talk, which is absent in online meetings, makes the experience so much more enjoyable.
The increase of virtual meetings “put a double premium on the power of face-to-face. You might do it less, but when you do it, it has to have more value. It has to have more richness. It has to be more unique. It has to be more immersive. It has to have a higher value content. It has to allow you to create connections that you couldn’t otherwise do more efficiently, digitally or virtually.”
I wholeheartedly agree with the above statement made by Lord Stephen Carter, CEO of Informa, the newest addition to the Global Income & Growth fund. He should know, as ¾ of Informa’s revenue is generated from live and on demand events [1].
It’s no surprise that the company was hit hard in 2020 with the onset of Covid, which led to a suspension of the dividend and rights issue. However, Informa took the opportunity for restructuring and doubling down on what it does best - connecting people and knowledge at live events. The company runs over 600 trade shows in 30 countries including Black Hat in Cyber Security, Super Return in Private Equity or Arab Health in Healthcare.
In 2021 Informa initiated a “Capital Recycling Program” that led to the divestment of £200m of data revenue (>12% of sales at the time) with proceeds of around £2.5bn at an EV/EBITDA multiple of 28x [2]. The proceeds were used to acquire around £600m of events revenue at 11x EV/EBITDA [3]. The renewed focus on B2B events resulted in new products and upgrades to existing platforms and services. With more of the larger unmissable live experiences, it took the view that customers would see the higher value in time. Today, Informa is twice the size of the next player in B2B events. But it’s not just the size that has changed in the last 5 years but also parts of the business model.
Today, 60% of revenue comes from recurring and predictable sources (exhibitor fees and subscriptions). [4]
The company has also established a customer data platform called the Data & Analytics Engine. It collects, analysis and enriches customer interactions across all brands and products, which can be done at vendor management, chatbot or invoicing level. It improves attendee experiences and gives exhibitors better lead information. Internally, Informa use this to establish trends and market to more targeted audiences, increasing the desirability and revenue potential for each event. The value add offered to exhibitors and attendees will make visiting the most important event in an industry a must.
Like many leaders in industries that had a tough time, Informa has come out of the pandemic stronger. It has cemented its market position, strengthened its business model and expanded into new high growth areas like the Middle East or Cyber Security. While sales have already surpassed pre Covid levels, margins are still recovering. Newfound pricing power and operational leverage will help close the gap between 2023’s 26.8% adj. operating margin and the target of 30% [5]. The equivalent in 2019 level was 32.3% [6]. The business is now less dependent on single events, with a wider geographic spread. Better analytics means that Informa is able to detect trends earlier than the competition, and thereby create and grow events ahead of time.
With all this in mind, we believe Informa is in a strong position to grow sales, margins and cash flow in the coming years. However, the valuation of 15x 2025 PE is similar to pre pandemic levels [7]. This despite the step up in organic growth from low to mid-single digit, the margin and returns upside and the reduction in business risk. We believe Informa is still in the “show me” category of companies that have used the pandemic to change their business model for the better. In time this has the potential to be reflected in higher earnings and valuation.
We financed the purchase of Informa by exiting our position in IPG, which is in talks to merge with Omnicom. While we believe this will create a strong leader in the advertising space in 3-5 years’ time, the potential disruption from such a larger merger was concerning, given the mixed recent performance of the standalone business.
[1] https://www.informa.com/globalassets/documents/investor-relations/2024/informa-full-year-2023-results.pdf
[2] https://www.informa.com/globalassets/documents/investor-relations/2023/informa-2022-full-year-results-statement.pdf
[3] https://www.informa.com/globalassets/documents/investor-relations/2023/informa-2022-full-year-results-statement.pdf
[4] https://www.informa.com/globalassets/documents/investor-relations/2024/2023-informa-annual-report.pdf
[5] https://www.informa.com/globalassets/documents/investor-relations/2024/informa-full-year-2023-results.pdf
[6] https://www.informa.com/globalassets/documents/investor-relations/2024/informa-full-year-2023-results.pdf
[7] Bloomberg