ii view: Relx bullish on growth after 2025 starts well

AGM and first-quarter trading update to 31 March 

ii round-up:

RELX (LSE:REL) today flagged a positive start to 2025, with the provider of data services to industries such as insurance and lawyers maintaining expectations for strong underlying growth in sales and profits over the year ahead. 

All four business divisions have started the year well, with annual growth expected to be driven by a continued shift in the business mix towards higher growth analytics and decision tools. 

Shares in the FTSE 100 company rose marginally in UK trading having come into this latest news up by close to a tenth so far this year. That’s similar to financial markets data provider Thomson Reuters Corp (TSE:TRI) and comfortably ahead of a 1.5% gain for the FTSE 100 index in 2025. 

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At the group’s Risk division, generating 34% of 2024 sales, growth had been aided by general corporate demand for digital fraud and identity solutions, as well as growth in services for the insurance industry.

For its Scientific, Technical and Medical (STM) business, accounting for 32% of 2024 sales and operating industry journals, performance had been assisted by strong growth in article submissions.

At the Legal division, generating 20% of sales, AI enabled data is assisting its Lexus data platform with a new next generation AI backed assistant, Protégé, being well received by customers. 

Finally, for the Exhibitions business, performance had been pushed by changes in the event portfolio along with new digital initiatives. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the news, summarising the update as ‘predictably solid’ and flagging an estimated fair value price of £45.20 per share. 

ii view:

Started in 1903, Relx today employs over 35,000 people. Risk generated its biggest slug of profit in 2024 at 38%. That was followed by STM at 37%, Legal at 13% and Exhibitions the balance of 12%. Geographically, North America made most sales in 2024 at 58%, followed by Europe at 15%, the UK at 7% and the rest of the world the balance of 20%. 

For investors, possible cuts in US government funding for research could hinder demand. The tough economic backdrop for corporate customers and the temptation to try and reduce subscription fees, cannot not be ignored. A forecast price/earnings (PE) ratio above the three- and 10-year averages suggests the shares are not obviously cheap, while currency risks given its high proportion of overseas sales warrant consideration.

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To the upside, technology and AI are being used to enhance products and services. An ongoing review of its business portfolio continues to see small bolt-on acquisitions and sales made. Diversity of both operations and geographical regions exists, while more than 10 years of consecutive annual dividend increases leaves Relx offering a forecast yield of 1.7%. 

On balance, and while relatively defensive growth does not come cheap, exposure to corporate demand for sophisticated data is likely to see this optimistic global operator grow its investor fanbase. 

Positives: 

• Diversity in both business type and geographical region
• Growing dividend payment

Negatives:

• Uncertain economic outlook 
• Subject to currency headwinds

The average rating of stock market analysts:

Buy