Informa (LSE: INF) specialises in business and industry information services, and that’s surely always going to be in demand. The company also organises conferences, exhibitions and seminars around the world. There’s usually strong demand for those too, but not when we’re in the grip of a global pandemic.
The Informa share price crashed heavily in 2020 as a result of Covid-19. But with the shares now up 60% from their 52-week low, I’m wondering whether I should add Informa to my list of FTSE 100 best shares for 2021.
Before I think of the future, what about the past year? Thursday’s full-year results revealed the painful details of what happened in 2020. Earlier guesses suggested a drop in revenue of around 50%, but the reality wasn’t quite that bad. In the end, Informa achieved revenue of £1,661m, down 43% on the 2019 figure of £2,890m.
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Some revenue support
The company reckoned its revenue was supported by its subscription-led business model. Clearly, that can only have a limited protective effect against the ravages of the virus-led 2020 stock market crash. But it does suggest there’s a solid business beneath it all that tempts me to see Informa as a share to buy now.
How did profit hold up? Well, Informa revealed a statutory operating loss of £880m, from an operating profit of £538m in 2019. That is largely down to a whole host of Covid-related one-offs. And on an adjusted basis, the company reports an operating profit of £268m, down from £933m. Any underlying profit in 2020 seems good to me for a company like this. But I think it’s important to remember that the Covid-19 damage is still real.
For me to consider a stock among the best shares to buy, I’d want to see decent cash. On that score, Informa’s 2020 operating cash flow was positive, and I like that. It was greatly reduced, from £965m a year previously, to £231m. But I’d say any cash flow is good for the year we’ve just had.
Best shares to buy?
I think I’m looking at a good company with solid long-term potential. But it’s not one I’d buy at any price, so how is its valuation looking? The Informa share price is still down around 30% since the start of the pandemic, but it’s recovered quite strongly since September. From its 52-week low, we’re looking at a gain of 60%. That looks healthy, but I wonder if it might be too much, too soon.
On today’s share price, the 2020 adjusted EPS figure of 9.9p gives us a P/E of 56. That might not be too meaningful against such a one-off bad year. And based on 2019’s EPS, we’d see that multiple come down to around 11. Should Informa get back to 2019 earnings levels soon, it might deserve a place on my best FTSE 100 shares list.
But we have no idea when the conferences and exhibitions business will get back to full strength. And I don’t see anything approaching that in 2021. I think there’s a strong possibility of weakness for another year or two, and I just don’t see enough safety margin in the current share price.
I won’t buy now, but I’ll keep watching.
