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FY results reveal growth potential at Informa plc and Harworth Group plc

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If you are looking for the first time at Informa  (LSE: INF), the specialist publisher and information provider, and Harworth Group (LSE: HWG) the land and property regeneration company, you’ll probably be struck by the potential each firm has to grow from here.

Going for growth

Today’s full-year results describe Informa’s commitment to a growth agenda, expressed in the firm’s Growth Acceleration Plan, which the directors say has delivered three consecutive years of growth in revenue, adjusted earnings, free cash flow and dividends.

Indeed, the headline figures are encouraging with revenue up 11% compared to the year before, adjusted operating profit rising almost 14%, and adjusted diluted earnings per share rising by nearly 7%. The directors topped off these good figures by hiking the dividend 4.3%, which strikes me as a good sign that they are optimistic about the firm’s forward prospects.

Chief executive Stephen A Carter reckons 2016 was “steady and strong” for Informa and the business grew on all key financial measures, while expanding in the US and investing in its products, which sets it up for further progress during 2017. He expects the firm’s recent acquisition of Penton to help propel accelerated change in earnings growth during 2017.

Last year, North America was Informa’s largest market delivering 46% of revenue. Meanwhile, 16% came from continental Europe, 11% from the UK and 27% from the rest of the world. I think Informa’s organic and acquisitive approach to international expansion could drive further growth from here, which makes the stock interesting and worth further research.

Creating value

Last year, Harworth saw its net asset value grow by 12.5%, operating profit ballooned by 21% including value gains, and earning per share increased by nearly 13%.

According to chief executive Owen Michaelson, the strong results are down to the firm’s focus on maximising the value of its strategic land bank while at the same time growing its income with new lettings and acquisitions. Mr Michaelson points to the increase in value achieved with the company’s flagship North West site, Logistics North in Bolton, as a prominent performer in the firm’s portfolio. He reckons market fundamentals in the firm’s operating regions are strong, which should marry with the company’s strategy to create value and drive further strong business performance during 2017 and beyond.

Harworth’s operating model is interesting. It regenerates brownfield sites and invests in property, owning and managing a portfolio of 22,000 acres of land on more than 140 sites, many of them related to former coalfields. Its redevelopments include employment areas, new residential developments and low carbon energy projects. I think the firm plays a useful role and it’s pleasing to see the company going about its business profitably.

Fair value and growth potential?

At today’s share price around 680p, Informa trades on a forward price-to-earnings (P/E) ratio of 13.4 for 2018 and the forward dividend runs at 3.2%. City analysts following the firm expect earnings to cover the payout just over 2.3 times.

Meanwhile, at 97p, Harworth’s dividend runs around 0.8% and the firm’s price-to-tangible net-asset-value figure comes in at around one. The dividend might be small, but the directors are committed to a progressive dividend policy. Both firms look like they are trading around fair value to me, yet both have potential to make sound operational progress from here.

Dividend payers to buy now

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.