Informa remains defensive

Events, training and publishing may look like vulnerable activities in a downturn, but that's not the case for Informa - last month it released a trading update indicating that it was still on track to meet analysts' full-year expectations.

The group's publishing business, which produces titles such as shipping industry newspaper Lloyd's List, offers a broad range of academic and scientific titles. These niche publications have a loyal subscriber base with most of the titles paid for on a subscription basis. In fact, about 30 per cent of group sales come from subscription revenues and renewal rates are extremely high, particularly on the academic titles. Business information titles - covering publications in areas such as healthcare and commodities - boast a healthy 77 per cent renewal rate. Reassuringly, the update also confirmed that the publishing division has continued to grow.

That sizeable subscription base also means Informa does not have to rely on advertising revenues and just 3 per cent of group sales come from advertising. Given the grim state of the advertising market - advertising agency Group M expects global advertising spend to fall 5.5 per cent in 2009 - that leaves Informa looking like one of most defensive media sector plays.

True, Informa's events business, which generates 34 per cent of group revenues, has been less resilient. The trading update indicated that management now expects "considerably lower" organic revenues from the division than was the case last year. The business hosts large events such as the Monaco Yacht Show and the India Business Forum, as well as smaller training events and courses. But the smaller, local language training courses and events have seen falling demand, although management has reacted quickly and cut roughly £8m of costs last year. But because larger-scale events - those with sales of more than £0.25m - generate almost 70 per cent of the division's profits, a fall in the number of events held has only a marginal earnings impact.

In fact, management has been looking beyond the events division to generate savings. Last year, for instance, £33m of annualised savings were pushed through while, this year, management expects to make a further £20m of annualised savings, although this will result in a one-off £10m cost this year.

Informa's debt pile has also been reduced, thanks to May's two-for-five rights issue, which raised £242m. Prior to that, net debt stood at £1.3bn and concerns were growing that banking covenants could be breached. Specifically, Informa's debt-to-earnings ratio stood at 3.77 times, while its banking covenants set that ratio at no more than 4.25 times. But the new cash allowed debt to be reduced to £1.1bn and analysts at broker Panmure Gordon estimate that the ratio of debt-to-earnings has now been cut to a more manageable 2.9 times.