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RELX - growth on all fronts

RELX reported full-year underlying revenue growth of 8%, to £9.2bn.

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Relx reported full-year underlying revenue growth of 8%, to £9.2bn. Growth was broad-based across business units, with Exhibitions the standout as it continues to benefit from a recovery in face-to-face activity.

Underlying operating profit rose 13% to £3.0bn. Costs rose at a slower pace than revenue which, together with the face-to-face recovery, resulted in a margin uptick from 31.4% to 33.1%.

Net debt as of 31 December 2023 was £6.4bn, down from £6.6bn. Free cash flow was stable at £2.0bn.

The board proposed an 8% rise in the full-year dividend to 58.8p. The intention is to buy back £1bn worth of shares over 2024.

The shares rose 2.2% in early trading.

Our view

RELX, a leading data solutions provider, operates across four main segments: Risk, Legal, Exhibitions and Scientific, Technical & Medical (STM). The company provides critical data analytics services to top insurance companies, law firms, and academic institutions.

Growth last year came from all fronts, with the Exhibition business leading the way. It's encouraging to see the recovery from Covid in full swing, but it's not just face-to-face activity driving the growth. The space is becoming increasingly digitised and the new streamlined operation means margins are set to improve from pre-pandemic levels. It's a relatively small piece of the pie, but enough to move the dial.

Its digital products are the real lever though, accounting for 83% of group revenue. This is the area we're most excited about. The company has a large competitive moat due to its proprietary, hard-to-replicate, data and its sophisticated analysis that produces valuable customer insights.

Data analytics is also a relatively anti-cyclical area, meaning it tends to be essential irrespective of economic conditions. Plus, over 50% of the company's revenue comes from recurring subscription models, providing stable and predictable cash flows.

Being weighted heavily toward electronic services has other benefits too. Earnings are very high quality, meaning almost all of the group's operating profit is backed by operating cash flow. Add in a strong balance sheet and shareholder returns are well supported. There's a modest 1.9% forward dividend yield on offer and buybacks are also an important part of the returns strategy. The group returned £800mn last year buying back shares, and the plan is to buy back £1bn worth over 2024. As ever, no returns are guaranteed.

Future growth is going to be driven by improving data analytics, the use of AI being a key element. It's an exciting area given the boom we've seen this year but not something RELX is new to. Having huge troves of data starts to really shine through when you build and train AI tools on top of it. Lexis+ AI is the shiny new AI-driven platform available for legal users, and initial adoption looks promising.

We like the business. Recurring revenue, as well as high quality earnings, are key attractions and providing data analytics is an area we see growing. But there's no such thing as a free lunch, and the valuation at around 27 times expected earnings has continued its march above the long-term average. That adds pressure to deliver and increases the chances of short-term volatility.

RELX key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Matt Britzman
Equity Analyst

Matt is an Equity Analyst on the share research team, providing up-to-date research and analysis on individual companies and wider sectors.

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Article history
Published: 15th February 2024