Trojan Income Fund (Ireland)

In last month’s factsheet, we wrote that we were starting a new UK holding. Having now built a position, we are happy to disclose that the company is Informa, a c.£11bn market cap B2B company focused on live events and academic publishing.

Live events account for the majority of sales and profit, with Informa being the world’s largest operator of B2B trade shows and conferences. The company own key brands and ‘must attend’ shows within various industries globally. For instance, they operate CPHI Worldwide, the largest pharmaceutical exhibition in the world, and Black Hat, a leading cybersecurity conference that takes place in Las Vegas. Each year, Informa put on over 200 of these large-scale trade shows and each of them play a valuable role within their respective markets by facilitating trade and relationship building between thousands of industry professionals. This division of Informa has many aspects we value highly at Troy; revenues are highly diversified by sector and geography whilst leading shows within specific industries are almost impossible to displace. Thanks to high margins and significant upfront payments from exhibitors, who book and pay well in advance of a show taking place, the business is extremely cash generative with high returns on capital. Furthermore, whilst Informa is the market leader globally, ahead of fellow portfolio holding RELX, the industry is highly fragmented, providing ample runway for long-term growth.

Informa’s second focus is academic publishing, with the company operating globally under the well-known Taylor and Francis (T&F) brand. Academic publishing is a highly resilient industry that grows steadily across the cycle. As the world’s fourth largest academic journal and book publisher, T&F sit between academic authors and institutions, facilitating research, publication and distribution of content globally. The division has similarly high operating profit margins as the events business at over 30%, also enjoying strong cash generation. We like the role that the division plays within the wider group, offering significant ballast given the largely non-cyclical nature of revenues.

Led by a long-standing and capable management team, we find Informa a great example of the type of attractive opportunity currently available to UK equity investors. It is a market-leading, global business with strong incremental economics and good growth prospects. The shares trade at a highly reasonable rating of approximately 16x earnings and a 6% free cash flow yield. The dividend, which is more than twice covered by cash flow, is also attractive. It was increased by +10% at the recent half year results and represents a yield of c.2.4%.