Sunday 22 July 2018

Information and analytics are key to Relx's success

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Click to enlarge

John Lynch

The public no longer needs to be lectured about the transformative nature of technology.

But sometimes you have to step back and admire the revolutionary strides that a far-sighted group of managers, focused on technological change, can achieve.

Today's company, the dual-listed Relx (quoted in both London and Amsterdam) is a prime example of what I have in mind.

It describes itself as a multinational information and analytics company operating in critical sectors such as science, medical, technical and legal fields.

Relx has a huge database of information that its customers simply cannot seem to do without.

It focuses on areas such as insurance and healthcare, even crime. Indeed, it modestly proclaims in its annual report that it is in the business of "helping scientists make new discoveries, lawyers win cases, doctors save lives and insurance companies offer lower prices".

Being the custodian of that data, means, of course, that it controls a market to which the barriers to entry for a possible competitor are extraordinarily high. Now that is an attribute that has investors like me salivating.

Relx is a newish name for the group (since 2015).

It once traded as Reed Elsevier and, going back a bit further in its history, it was once the proud owner of such cherished British institutions as Crown Paints, Sanderson wallpapers, Polycell, the 'Sun' newspaper, the 'Daily Mirror', the 'Sunday People', along with medical and technical journals to beat the band.

These days, Relx's claim to fame is that it has surfed the tide of information technology in a way that few British companies have done and has the superior quality growth achievements to prove it.

In the 21st century, it has also created an investor's dream - namely a steady improvement in profit margins, low capital expenditure, decent dividend growth and an admirable fondness for share buybacks.

It may have taken the furore over the use of analytics during the election of US President Donald J Trump before most of us realised how far-reaching the acquisition of data can be - but a flick through the accounts of Relx shows how valuable the business is and how much money can be made from information on the internet.

Revenues in 2017 were worth just under €8.4bn and the pace of underlying growth was 4pc - a performance that has been pretty much matched over the past four or five years. Profit growth at the same time has been 6pc higher, underscoring the improvement in margins.

Anyone who has any doubts about Relx as a technology company only has to look at where revenues have sprung from since the turn of the millennium.

Back in the year 2000, its electronics activities were chipping in 22pc of group turnover, while the group's print business accounted for 64pc of sales.

By the time recession came calling in 2008, the electronic turnover had grown to 50pc of the business, while print was responsible for 33pc.

The latest figures from the company show that now, seven years later, the electronics sales account for the majority of group turnover and print has reduced to a mere 11pc and is getting smaller.

The bulk of the group's business is in the United States, where 55pc of sales were recorded.

Europe accounted for 23pc of the business in 2017 and the balance was elsewhere in the world.

Relx shares are currently standing at around €18.20, giving the group a market capitalisation of €18.50bn.

The stock has been slightly off the boil this year, falling by some 17pc from January to March. It was challenging its all-time high of €19.60 in December.

Since March, there has been a decent recovery - perhaps not entirely unconnected with the fact that the group is in the middle of returning another €800m to shareholders this year.

With a price earnings multiple of 20 and a dividend yield of 2.5, Relx shares are worth looking at.

Nothing in this section should be taken as a recommendation, either explicit or implicit, to buy any of the shares mentioned

Irish Independent

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