Relx makes hay despite currency headwinds

Relx (REL) is a skilful shape-shifter. The global provider of data and decision tools started life in the late 1800s with a modest paper mill, before moving into publishing and media. At its peak, the group published more than 300 printed trade titles. Now, however, paper barely features in its business model. Over 85 per cent of Relx’s revenue comes from its digital products – demand for which is high. 

Relx has four divisions: risk & business, science & technology, legal, and  global events. Risk & business is performing particularly strongly, as demand for fraud prevention analytics and decision tools grows.

However, management also noted stronger than usual growth in its science and legal segments in 2021, and said it will invest in “increasingly sophisticated” digital tools going forward to attract customers. Print revenue has continued to decline "in line with historical trends".

The company's events division – which accounts for around 7 per cent of group revenue – has also rebounded strongly after a predictably difficult lockdown, up almost 50 per cent on 2020.

Relx is facing some currency headwinds, however. This is because it reports in sterling, despite the majority of its sales being in US dollars. Currency movements in 2021 reduced revenue growth by 6 percentage points, while currency effects decreased adjusted operating profit by 7 percentage points

This has done little to hamper shareholder returns. Relx has announced a full-year dividend of 49.8p – up 6 per cent on 2020 – and also intends to deploy a £500m share buyback.

The group has also improved its debt position: the pandemic pushed the group’s net debt to Ebitda multiple up to 3.3, but this has now fallen to a more comfortable 2.4x.

With a forward price to earnings ratio of 23, Relx is cheaper than peers such as Thomson Reuters (US:TRI) and Experian (EXPN). It also has a convincing growth story. Data is increasingly valuable and Relx’s formidable archive could serve a range of purposes as its analytical tools become more advanced. It also creates a high barrier to entry, which should see off the bulk of the competition. Buy. 

Last IC view: Buy, 2,098p, 29 Jul 2021