Relx leaves print past behind

Earlier this week, news publisher Reach (RCH) detailed its difficult move from print to digital media. Paper is proving expensive, demand for physical newspapers is dwindling, but digital content is tricky to monetise. Such a transition is not impossible, however, and the group could look to Relx (REL) for some inspiration. 

Relx started life in publishing and media, but its print division now generates just 10 per cent of group revenue. Digital products have become the focus, with Relx providing data analytics and decision tools for different professions. Growth has been strong across the board, with total revenue growing by 13 per cent at constant currencies in the six months to 30 June. 

Headline growth has been flattered slightly by the return of in-person events (the group’s exhibitions arm tripled its adjusted operating profit year-on-year, after a long period of Covid disruption). However, Relx’s biggest division – risk – also grew profits by 7 per cent, buoyed by demand for fraud prevention tools. Growth in the group’s science and legal segments has also overtaken historic rates, according to analysts at Numis.

There are a few things for investors to watch out for. The strong US dollar means constant currency growth lags behind headline figures, but any reversal of foreign exchange moves would have the opposite effect. The company is  also quite heavily leveraged: it has almost £7bn worth of debt and a net debt/Ebitda ratio of 2.3. When it comes to big numbers, it’s also worth keeping an eye on Relx’s goodwill, which currently amounts to £8.3bn – more than half of its total asset base. Goodwill can be slippery to calculate, so investors should be alert to impairments going forward. 

However, Relx has shown itself to be a high quality and defensive business, with an uncanny ability to change with the times. Buy. 

Last IC View: Buy, 2,240p, 10 Feb 2022