RELX reported half-year revenue of £4.5bn, reflecting underlying growth of 8%. Performance was broad-based across the larger digital business areas, with the recovery of face-to-face activity helping Exhibitions rise 27%.
Underlying operating profit rose 16% to £1.5bn with growth driven by the recovery of face-to-face activity. Revenue growth outpaced the rise in costs, helping margins rise from 31.2% to 33.0%.
Net debt at 30 June 2023 was flat at £6.9bn, or 2.2 times cash profit. Free cash flow was £39m higher, at £928m.
Growth in underlying revenue and operating profit are expected to remain ahead of historical trends over the year.
The board has announced an interim dividend of 17.0p, up 8%. As of today, the ongoing £800m buyback has £200m left to go, with aims to complete by the end of the year.
The shares rose 4.1% in early trading.
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Our view
RELX, a leading data solutions provider, operates across four main segments: Risk, Legal, Exhibitions and Scientific, Technical & Medical (STM). The company provides critical data analytics services to top insurance companies, law firms, and academic institutions.
Half-year results were dominated by the resurgence of face-to-face activity which is critical for the group's Exhibitions business. Revenue was hit hard during lockdowns but venues are back open and the new streamlined operation means margins are set to improve from pre-pandemic levels. It's a relatively small piece of the pie, but enough to move the dial.
Its digital products are the real lever though, accounting for 84% of group revenue. This is the area we're most excited about. The company has a large competitive moat due to its proprietary, hard-to-replicate, data and its sophisticated analysis that produces valuable customer insights. That's one of the reasons it can offer cutting-edge products.
Data analytics is also a relatively anti-cyclical area, meaning it tends to be essential irrespective of economic conditions. Plus, over 50% of the company's revenue comes from recurring subscription models, providing stable and predictable cash flows.
Being weighted heavily toward electronic services has other benefits too. Earnings are very high quality, meaning almost all of the group's operating profit is backed by operating ca sh flow and it doesn't cost much to keep things running. That helps support the 2.4% forward yield, and paves the way for buybacks such as the one currently underway. As ever, no returns are guaranteed.
Future growth is going to be driven by improving data analytics, the use of AI being a key element. It's an exciting area given the boom we've seen this year but not something RELX is new to. Having huge troves of data starts to really shine through when you can apply AI, so we see the suite of products continuing to improve from here.
We like the business. Recurring revenue, as well as high quality earnings, are key attractions and providing data analytics is an area we see growing. But there's no such thing as a free lunch, and the valuation at around 22 times expected earnings is ahead of the long-term average. That adds pressure to deliver and increases the chances of short-term ups and downs.
Relx key facts
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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