Invensys shouldn’t face too many difficult questions from shareholders today at its annual meeting. On Wednesday the engineering and technology group reached a fresh milestone in its long road to recovery by agreeing a £400 million banking facility. The credit deal from HSBC, Lloyds TSB and Royal Bank of Scotland will run for five years and replaces arrangements made during its last refinancing two years ago.

Ulf Henriksson, the chief executive, wants to use the credit lines to buy new businesses to strengthen its three main operations – rail, which supplies signalling equipment; process systems, which makes operating systems for power stations and other complex industrial operations; and controls, which makes control devices, such as thermostats, for homes and businesses.

Invensys may never regain its former stature as one of the UK’s biggest companies, with a market capitalisation of £20 billion. But that was before a dramatic fall after several profits warnings, job cuts, a plunge in the value of its shares and the departure of a chief executive seven years ago.

Since then it has been steadily rebuilding itself after ensuring survival four years ago when it secured a £2.7 billion debt and equity rescue deal to help to tackle its £3.5 billion debt pile.

But Invensys is now on solid ground and is regaining status. Last month it returned to the FTSE 100, with its operations reclassified as technology rather than electronic equipment, to mark the changes in the business from when it last ranked in the index before its fall from grace.

Invensys now focuses on technology aimed at making control systems work more efficiently. On that basis, it believes it is in a good position to benefit from the development of industry and infrastructure systems in growing economies as well as with established operations.

The company is also producing decent results.

Last year, operating profits at constant exchange rates rose 19 per cent to £254 million.

It is hoped that Invensys will later this year take another step forward and pay a dividend. Buy.

Informa

The conference and professional publishing group Informa represents one of the most interesting investment problems in the current market. On the one hand, three private equity houses are working on a bid, at 506p a share. The threesome – Providence, Carlyle and Hellman & Friedman – need to raise a further £1 billion of debt, on top of Informa’s existing £1.25 billion load. That is challenging to say the least and the City is hardly confident that it can be done.

That explains why Informa’s share price is so far below the mooted bid. Rumours circulated yesterday that the buyers were struggling and the shares, already well below the approach price, fell 7 per cent to 395p. If the goal was to try to see if the syndicate was on track, it succeeded. Informa released no statement to confirm the rumours and the word from insiders is that the financing process continues, all be it slowly.

Nevertheless, investors are left with a stark choice. Buy in at 395p and, if the bid lands as advertised, make a handy 28 per cent. But with Informa’s debt at these levels there is plenty of risk, too. That amounts to about four times underlying earnings – the kind of level that is spooking media investors. Without a bid Informa’s stock would probably tumble, along the lines of the similarly indebted Yell, Johnston Press and Trinity Mirror.

Informa is down 8 per cent since the bid approach was disclosed, while Yell is off 28 per cent, Johnston Press 43 per cent and Trinity 55 per cent. Informa’s professional publishing and conference businesses are less prone to a swift downturn when compared with advertising-dependent media companies. But it is not recession-proof either: it is easy for companies to cut their conference spend or budget for Informa’s publications as part of cost savings. If the bid failed, the stock could easily fall 30 per cent and more.

It amounts to little more than a bet on the credit markets. Fun for traders, perhaps, but a bad basis for an investment. Avoid.

EasyJet

It’s fasten your seatbelt time in the airline sector as the capacity cutbacks and job losses seen in the US in recent weeks begin to land on this side of the Atlantic.

Ryanair’s headline-grabbing decision to withdraw a third of its aircraft at Stansted to save money came less than 24 hours after Spanair, the SAS subsidiary, said it was cutting 900 jobs and several routes because of high fuel prices. As yet easyJet is sticking to its guns and not planning any cutbacks this winter, although this position could well change as the economic gloom deepens.

The consumer slowdown is uncharted territory for the low-cost carriers that have transformed the skies since the 1990s. They have issued profit warnings in the past but these have been fuelled by high costs, rather than any slump in demand.

The fallout could be severe and while easyJet will be among the best placed to take advantage of any consolidation opportunities when the dust settles, a prolonged period of turbulence lies ahead.

The record oil price has seen projections for easyJet’s pretax profits this year come down by £100 million to £135 million. Yesterday’s 8 per cent jump in the share price suggests a rally could be on the cards if crude continues to fall.

However, the outlook for the economy means a buy stance is still too risky a proposition. Avoid.

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