Relx: the great survivor

Unsurprisingly, 2020 was not an easy year for Relx’s (REL) events business. Most of its revenues were wiped out by coronavirus restrictions, nosediving by 71 per cent to £362m last year. But the group’s three largest business areas, Scientific, Technical & Medical (‘STM’), Risk and Legal, together posted a decent 4 per cent growth in adjusted operating profit to £2.25bn. 

Exhibitions were open in some markets in Asia, but the segment still made an adjusted loss of £164m, compared to a £331m profit in 2019. That figure does not count exceptional costs of £183m, including £61m of costs connected to cancelled events, and £82m worth of restructuring costs. 

The impact of the pandemic also pushed the group’s net debt to Ebitda (cash profits) multiple up to 3.3, a figure which has historically sat between 2 and 2.5. But chief financial officer Nick Luff is confident that the company will return to that range. “We’re already moving in that direction. It will take a couple of years to get back there,” he added. 

Higher net borrowings than normal might tempt other companies to cut back on spending. But Relx has continued to invest in its other business areas, as well as completing 11 acquisitions over the course of 2020 for an aggregate £878m. Some of these deals have also helped to support the group’s digital-first strategy: electronic revenues in the year, which make up the bulk of the total, grew by 4 per cent to £6.18bn. Meanwhile print sales, which represent just under a tenth of group turnover, dropped by 14 per cent. 

The STM division, which includes academic publishing business Elsevier, launched 115 new journals in 2020. The group flagged that most of these were author-pays open access titles, leading to a total of 500. With article submissions for open access journals doubling and Elsevier supporting researchers with free access to some Covid-19 content, Relx may have also managed to strengthen its position in the open access debate. 

The company expects STM, Risk and Legal to deliver revenue and adjusted operating profit growth in 2021, in line with their respective trends before the pandemic. While the outlook for events is still unclear, Relx did note that its acquisitions last year included some exhibitions assets. Clearly then, it still envisions face-to-face revenue as a key part of its business model. For now, its mostly digital operations should be able to see it through the storm. Buy.

Last IC view: Buy, 1,676p, 12 Nov 2020