Questor: it will be slow going to get back to normal, but Informa is well run and worth the wait

Images of shoppers barging into NikeTown in Oxford Street in London last week were as worrying as they were encouraging. Worrying because of fears that a second wave of Covid-19 cases will disrupt the delicate journey back to normality; encouraging because it is clear that consumers could not wait to get there.

As each sector of the economy is allowed to reopen, protection is put in place and demand is tested. Beyond the initial surge, to what extent people will be sprinting to the shops in a few months’ time to pick up a new pair of Air Max trainers is a tussle between inconvenience, necessity and the human desire to be out and about.

That craving for physical contact will take longer to satisfy in the events industry, which has pegged its hopes on an autumn revival. It seems almost quaint that people will board planes and fly to distant places in order to network with peers once again, having discovered the delights of Zoom. But those who think conferences and trade shows are dead have probably given up on company offices too.

Pent-up demand suggests people want to come back as long as it is safe and – in a recessionary environment – it benefits their business to take at least a day out from their schedule, don a lanyard and tour the exhibition floor.

Informa, which runs hundreds of large-scale events in a normal year, including Arab Health and World of Concrete, points out the low demand from customers for rebates when it has had to postpone.

It is one positive to cling to while the company has reshaped its calendar, cancelling or rescheduling 160 events for 2021 and switching a further 300 to digital get-togethers.

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An early test comes on July 9, when China Beauty Expo, which showcases suppliers and services in make-up, perfume and medical enhancement, throws open its doors in Shanghai. Bookings have been encouraging as China tries to get back to business.

Elsewhere in the world, September is crucial, with the Magic fashion trade show in Las Vegas and security gathering Ifsec at London’s ExCeL centre among dates in the diary. Informa is focusing first on recapturing domestic audiences, which make up 75pc of exhibitors.

Analysts at Shore Capital, the broker, have pencilled in for this year a 70pc revenue decline at Informa’s all-important markets division, which makes up half of group sales, recovering next year but not quite to 2019 levels.

The company’s trading update on June 12 was reassuring but several analysts who follow the firm are not yet as bullish as Stephen Carter, Informa’s chief executive, who has expressed hopes for annual group revenue of £2bn.

Credit Suisse has swung from forecasting a £122m operating loss this year to £132m profit and marked up its hopes for the following two years by 11pc and 5pc respectively. But it will be a long road back. As things stand, the investment bank thinks it will take a decade for Informa to regain 2019’s level of earnings per share.

On April 16, the company was swift to raise £1bn in a placing of new shares priced at 400p each, which reduced its borrowings to £1.4bn and boosted liquidity.

However, it may yet ask for a waiver on its debt covenants, depending on how the year progresses. In the meantime, the company has taken remedial action with the aim to squeeze out £400m of costs.

There is some consolation to be had in the 35pc of group sales derived from subscriptions, which have held up well in areas such as pharmaceuticals, where Informa owns news and information databases such as Citeline and Scrip. Times have been harder for Taylor & Francis, whose academic textbook sales have suffered while universities are closed.

Much has changed since Questor last recommended Informa shares in December 2018. It will be slow going to get the crowds back, but Informa is well run and worth the wait.

In addition, if second-tier events suffer, as seems likely, and consolidation of this still-fragmented industry accelerates, the company should be a beneficiary.

Trading on 11 times analysts’ consensus forecast earnings for 2021, the shares are worth queuing up for.

Questor says: buy

Ticker: INF

Share price at close: 495.3​p

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