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At the same time as going digital, Relx's digital activities have moved away from being a reference service to focus on data analysis to aid clients' decision-making. The Farmers Weekly deal is emblematic of this process, too, as Relx retains its successful Proagrica product – an agricultural connectivity, workflow, data and analytics business spun out from the publication.

The modern group comprises four divisions. The largest is science, technical and medical (STM) – which includes famed titles such as The Lancet. STM generated a third of group revenues in 2018, at £2.5bn – up by 2 per cent on an underlying basis. Risk and business analytics wasn’t far behind, contributing £2.1bn on 8 per cent growth. Legal and exhibitions made up the remainder. 

For many years Relx has been investing in technology to squeeze more value from a huge archive of data and content, which includes over 15m academic STM articles; 45bn public records used by its risk and business analysis division; and more than 81bn documents accessed through its Lexis Nexis legal product. Its services typically account for less than 1 per cent of its clients' costs, but can significantly improve decision-making. Its products help scientists make new discoveries, doctors and nurses to improve patients’ lives, lawyers to win cases, insurers to better assess risk, and businesses to prevent fraud. All this means its clients are sticky, revenues are reliable (over half are subscription-based), and the barriers to entry are huge, given the enormity of the task of constructing rival datasets and technology.

From a financial perspective, this enviable competitive position has been reflected in extremely attractive and improving fundamentals (see chart below). The quality of the business is also reflected in the fact it is the top holding of the Lindsell Train UK Equity Fund run by buy-and-hold doyen Nick Train. Consistently strong cash generation means that over the past five years the company has been able to return £6.7bn to shareholders, split almost evenly between dividends and share buybacks. 

The company also regularly uses its cash to make bolt-on acquisitions to support a growth strategy aimed at broadening its datasets, deepening analytical capabilities and targeting long-term growth markets. By historical standards, spending on acquisitions both last year (£978m) and in the first nine months of 2019 (£378m) has been high. This led to net debt (including leases and pensions) rising to 2.6 times cash profits in June compared with 2.2 two years earlier. However, we don't see this as a major concern given the consistency of cash generation and potential to reduce buybacks if need be.

Arguably, a more pertinent concern is the debate around open access to academic publications, which has seen some universities round on Relx's subscription services. However, while this threat – including possible regulatory intervention – cannot be ruled out, the quality of the STM division's publications and its important role in peer review and sourcing, means it looks well positioned. Currency is also a risk given Relx reports in sterling but generates only 7 per cent of revenue in the currency compared with 55 per cent in dollars.