RELX reported underlying revenue growth of 7% over the first nine months of the year, in line with market expectations. The Exhibitions division grew at the fastest pace, up 13%, helped by digital initiatives and an easy comparative period.
Growth rates in the three analytics division (Legal, Risk and Scientific) were all in mid-to-high single-digit territory. This was helped by a shift in the business mix towards “higher growth” areas.
Guidance for the full year is unchanged, pointing to “strong” increases in underlying revenue and operating profit.
The shares were broadly flat in early trading.
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.
Growth is coming from all fronts, with the post covid recovery in the Exhibition business leading the way. But it's not just face-to-face activity driving the growth. The space is becoming increasingly digitised, 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 fully 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.
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 cash flow. Add in a strong balance sheet and shareholder returns are well supported. There’s a modest 1.9% forward dividend yield on offer and buybacks are also an important part of the returns strategy. The group returned £800mn last year buying back shares, and had already executed £750mn in the first half of 2024. 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 build and train AI tools on top of it. Lexis+ AI is the shiny new AI-driven platform available for legal users, and the roll out is continuing to do well.
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 28 times expected earnings and that adds pressure to deliver and increases the chances of short-term volatility.
Environmental, social and governance (ESG) risk
The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.
According to Sustainalytics, RELX’s overall management of material ESG issues is strong.
In 2022, RELX’s board reviewed the company’s progress on sustainability and social responsibility goals, with regular updates from the global head of ESG. The CEO and CFO’s annual incentives are now tied to non-financial targets like carbon reduction and responsible sourcing. Employees receive training on data privacy, security, and business ethics, with a global mentorship programme and regular employee surveys to support human capital management.
RELX key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. 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.
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