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Monday, July 28, 2008

Informa Profits Up or Down or Both.

Informa, still in the midst of rumours of a private equity bid, has posted its interim results. Revenue is up 18% and profit 21% they brag. With just 3% of its revenues in advertising Informa is faring better than most they argue. Still, I would be pretty unhappy in that circumstane with a low margin of just 12% at the unadjusted profit level. As ever with these things, all is not quite what it seems. The 21% profit growth is after the real number (which is a rather more modest 4% profit growth) has been adjusted for exchange rate differences, reorgonisation costs and the like.

So Informa want the credit for the revenue growth, but not the costs of making it happen. Mmm. As the statement points out,

"The Group's profit before taxation decreased to £60.0m (2007:£87.8m) and basic earnings per share decreased to 10.96p (2007:16.24p) as a result of higher amortisation charges arising from last year's acquisition of Datamonitor."

Ok, so what is headlined as an increase, is actually a decrease. Amortisation is simply the writing off of capital expenditure. In other words its costs incurred in a prior period not yet reported in the profit and loss account. You can't pretend they don't exist.

These are a good set of results - better than most b2b companies and more likely to be robust through the cycle than many, but they are nowhere near as marvelous as the headline implies. My worries would be;
Organic growth is very modest (4% is neutral in real terms)
The debt burden is huge (£1.2b of debt - thats twice turonover)
The downturn coming in the conference business - Informa has inside it the global behemoth conference organiser IIR). As their statement says,

"The Group is subject to high sensitivity in relation to average delegate attendance"

High sensitivity! Oh bugger and I thought if you weren't in advertising you were safe.



At 3:56 am, Anonymous Kazu said...

concise, straight forward summary. the emporer has no clothes :-)


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