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Reliable Relx keeps growing

The data and analytics group has increased its operating profit by a fifth
February 16, 2023
  • £800mn share buyback announced
  • Strong growth across core divisions 

Business-to-business data company Relx (REL) often flies under the radar. However, with a market cap of almost £50bn it is one of the FTSE 100’s big players – and one of the most consistent.  

In the year to 31 December 2022, revenue jumped by 18 per cent to £8.6bn, and 9 per cent of this growth was organic. This caused operating profit to surge by a fifth to £2.7bn. Management attributed the group’s success to its increasingly sophisticated analytics and decision-making tools. The company invested £400mn in new products and infrastructure in 2022, up from £309mn in 2021 and £333mn before the pandemic hit, in order to keep ahead of the curve. 

This seems to be paying off. Relx has four key divisions – risk, science, legal and events – and all four grew their organic operating profits by at least 5 per cent. Fraud prevention analytics and decision tools proved particularly popular, as did legal data sets. The group said growth was fuelled by existing customers paying for more products, as well as a growing client base. 

One of the joys of Relx’s business model is that a big proportion of its revenues are recurring, as clients subscribe to particular products. In 2022, the balance shifted slightly, with subscriptions growing more slowly than “transactional” sales. As a result, the proportion of money made from subscriptions has dipped slightly from 58 per cent to 54 per cent. However, visibility remains good for 2023, with scientific and legal growth expected to be above historical trends.

One thing to keep an eye on is Relx’s exhibitions business. The division took a massive hit during the pandemic and has still not fully recovered. Revenue is still 25 per cent below pre-Covid levels, while its adjusted operating margin sits at just 17 per cent, compared with 26 per cent in 2019. Impressively, the group’s adjusted operating margin is back in line with 2019, but it would be higher if events were out of the equation. Rivals Informa (INF) and Ascential (ASCL) have chosen to separate their events and data arms in recent months, and it will be interesting to see what approach Relx ultimately takes.

Big technology companies aren’t easy to find in the UK, and Relx doesn’t come cheap, with a forward price/earnings ratio of 22. However, we’re still drawn to the group’s huge archive of data and robust customer base. Plus, investors will be pleased to know that the group will be splashing out £800mn on share buybacks this year. Buy. 

Last IC View: Buy, 2324p, 28 July 2022

RELX (REL)    
ORD PRICE:2,513pMARKET VALUE:£48.0bn
TOUCH:2,512-2,514p12-MONTH HIGH:2,474pLOW: 2,056p
DIVIDEND YIELD:2.2%PE RATIO:29
NET ASSET VALUE:169p*NET DEBT:188%
Year to 31 DecTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20187.491.7271.942.1
20197.871.8577.445.7
20207.111.4863.547.0
20217.241.8076.349.8
20228.552.1185.254.6
% change+18+18+12+10
Ex-div:27 Apr   
Payment:07 Jun   
*includes intangible assets of £10.7bn, or 559p per share