The Investment Column: Informa provides a solid defensive story, plus growth

Corin Group; Avanti Screenmedia
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The Independent Online

Our view: Buy

Share price: 489.5p (+27.25p)

In the hard-pressed media industry, organic revenue growth rates of 11 per cent are pretty unusual. But that is the happy position Informa revealed yesterday in its interim results.

Informa is in the enviable part of the media industry that is able to offer both defensive qualities and growth.

It publishes academic and scientific research and books, trade journals including Lloyd's List, and puts on trade shows. It also provides specialist operational expertise to other businesses - its pseudo-consultancy "Performance Improvement" part of the company, which licences its methods, such as sales optimisation techniques. The 16 per cent growth in Performance Improvement revenues was particularly impressive.

Informa successfully sells services provided by one part of the group to customers of others. For instance, the Performance Improvement unit is promoted in the company's specialist publications and at its trade shows.

And so it was with last year's £770m acquisition of IIR, which seems to have invigorated Informa's existing businesses. While there was not much in the way of cost-savings from the deal, revenue synergies have certainly flowed from it.

The group also benefited from new life in the academic book market, with a 10 per cent rebound in first-half sales after a flat performance for the period last year.

The effect of operational gearing meant group organic profit growth was a stunning 21 per cent, at £105.1m.

All of this raises two questions: can such a growth rate be sustained and will success tempt the company into more big deals?

Although Informa insists there are a lot more opportunities to realise from the combination with IIR, growth is bound to moderate a little. And while Informa is not focused on other large deals, if either Springer or Blackwell came on the market, they would be very tempting.

A well-run business with good prospects. Buy.

Corin Group

Our view: Buy

Share price: 207.75p (+9.25p)

Cautious optimism that unstemmed cormets may appear in America by the end of the year spurred Corin shares 9.25p higher.

No, cormets are not exotic birds or plants, they are a type of artificial knee developed by Corin and awaiting approval by the US Food & Drug Administration.

Interim results yesterday were a sideshow. At £1.9m, underlying profits before tax were some £200,000 lower in the first six months of this year following heavier investment in new products.

Sales at home and in America were down a touch. They grew slightly in Germany, despite a strike by surgeons. Sales in Japan jumped 26 per cent as more distributors sold more artificial joints to more surgeons.

The interim dividend was maintained at 0.48p a share, although there had been hopes for a modest increase from some in the City.

All of which has little meaning for anyone mulling whether to buy Corin shares. Their short-term price will stand or fall on whether and when FDA approval is granted for its unstemmed cormets, and that is far from clear. Should US approval be granted before the end of 2006, expect Corin shares to gallop. Failure to be given a green light before 2007 is likely to see a sharp correction and disappointing earnings.

Investors would do better to take the longer view. There appears little doubt that the key product of this decent little company will eventually receive FDA approval.

A niche player, Corin would also make a neat bolt-on acquisition for a bigger healthcare firm. For those prepared to weather possible short-term turbulence, the shares are a buy.

Avanti Screenmedia

Our view: Buy

Share price: 288.5p (+6p)

It has taken a while, but Avanti Screenmedia has signed a deal to install TV screens in 206 Spar stores across the UK. The deal with Tates, the largest operator of Spar convenience stores in the country, to provide advertising and promotional screens across the retailer's sites and to sell advertising for the network is an important step for Avanti after its successful deployment of screens across shopping malls and pubs.

The Tates deal is worth nearly £10m in sales over the next five years. And with more than 2,700 Spar stores in the UK and 16,000 internationally, there is significant potential to increase the scale of the screen rollout if the deal boosts sales at those outlets.

Yet retail screens are only one part of the story at Avanti. In 2008, the small-cap company will launch the first British satellite since 1989. It has already sold a slice of future capacity, proving there is likely to be strong demand for wholesale satellite television. Some brokers believe the current £61m valuation of the business is justified on the satellite business alone, meaning the core screens business could provide significant upside. The company trades on a relatively modest 20.5 times 2007 forecasts and although it is still early days in both its businesses, progress is steadily being made. Buy.

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