- The company held 87 face-to-face events during the six months ending 30 June
- Its risk business has benefited from greater online activity during the pandemic
Underlying growth rates will be “slightly above historical trends”, information and events group Relx (REL) said on Thursday, even as the latter division was hit by ongoing Covid-19 restrictions.
Exhibitions brought in revenues of £121m for the six months ending 30 June, down two-fifths from the prior period which included two months of strong trading before the pandemic took hold. Still, adjusted operating losses here narrowed slightly from £66m to £48m, which the FTSE 100 company attributed to structural cost savings.
Despite the continuation of virus measures across the globe, Relx still held 87 face-to-face events in the first half, mainly in China and Japan. It said that it was remaining flexible about its 2021 event schedule and that the outlook would depend on the “pace and sequence” of events resuming.
But events are the smallest collective contributor to Relx’s top line. Within its scientific, technical and medical (STM) business, the group’s underlying revenues rose 4 per cent to £1.3bn – aided by electronic sales which makes up almost nine-tenths of the divisional total. It helped that print book declines “stabilised” after particularly steep falls last year.
Meanwhile, chief financial officer Nick Luff observed that many of the trends which were already supporting growth in Relx’s risk business had been accelerated through the pandemic, including the extent of e-commerce and the general amount of activity taking place online. Risk revenues ticked up by a tenth on an underlying basis to £1.2bn, with business services – which constitutes roughly 4 per cent of divisional sales – posting double-digit growth amid increasing demand for fraud prevention analytics.
Relx made five acquisitions in the first half, totalling just £46m, compared to a £720m spend in the first half of 2020. It sold various assets for total proceeds of £5m. Luff noted that the group has probably averaged £400m on acquisitions every year, but while such deals “are important strategically”, Relx’s investment case centres on organic growth. “We have lots of opportunity to grow in our existing markets, in adjacent markets” he added.
| RELX (REL) | ||||
| ORD PRICE: | 2,098p | MARKET VALUE: | £ 40.4bn | |
| TOUCH: | 2,097-2,099p | 12-MONTH HIGH: | 2,101p | LOW: 1,505p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 126p* | NET DEBT: | £6.3bn | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2020 | 3.50 | 666 | 28.4 | 13.6 |
| 2021 | 3.39 | 825 | 34.5 | 14.3 |
| % change | -3 | +24 | +21 | +5 |
| Ex-div: | 05 Aug | |||
| Payment: | 08 Sep | |||
| *Includes intangible assets of £10.4bn or 541p a share | ||||
Brokerage Numis, which maintains a ‘Hold’ recommendation on Relx’s shares, anticipates pre-tax profits of £2.1bn for the year ending December with EPS of 86p, up from £1.9bn and 79.6p respectively. Analysts here believe that Relx’s strategy and its focus on analytics may have been priced in. And a multiple of 24 times earnings does look expensive relative to Relx’s five-year average which FactSet puts at 19.1.
Still, that valuation compares with one of 33 times for international peers IHS Markit (US:INFO) and 49 times for Thomson Reuters (CAN:TRI). On balance, we remain cautiously positive. Buy.
Last IC view: Buy, 1,805p, 11 Feb 2021
