Interactive Investor

ii view: RELX details £1bn share buyback amid confident AI outlook

A diversity of data-based businesses and with fund manager Nick Train a fan. Buy, sell, or hold?

15th February 2024 12:06

Keith Bowman from interactive investor

Full-year results to 31 December

  • Underlying revenue growth of 7% to £9.2 billion
  • Adjusted pre-tax profit up 9% to £2.72 billion
  • Final dividend of 41.8p per share
  • Total full-year dividend up 8% to 58.8p per share
  • New £1 billion share buyback programme

Chief executive Erik Engstrom said: RELX delivered strong revenue and profit growth in 2023, driven by the ongoing shift in business mix towards higher growth information-based analytics and decision tools that deliver enhanced value to our customers across market segments.

We have been able to develop and deploy these tools across the company for well over a decade by leveraging deep customer understanding to combine leading content and data sets with powerful technologies. We are confident that our ability to leverage artificial intelligence (AI) and other technologies, as they evolve, will continue to be an important driver of customer value and growth in our business for many years to come.

ii round-up:

Information and analytics company RELX (LSE:REL) today detailed a higher-than-expected share buyback programme as it offered confidence in its outlook aided by its ability to leverage artificial intelligence.

Sales and profits rose broadly in line with City expectations, but with its new £1 billion 2024 buyback ahead of forecasts of around £800 million. A final dividend of 41.8p takes the total 2023 payment up 8% to 58.8p per share. 

Shares for the FTSE 100 company rose 2% in UK trading having come into this latest news up by just over a third during the last year. That’s ahead of a near one-fifth gain for rival exhibitions business owner Informa (LSE:INF) and better than a 5% retreat for the 100 index itself over that time. 

Formerly Reed Elsevier, RELX provides sophisticated information-based analytics and decision tools to its base of professional and business customers including insurance companies, science-oriented organisations and law firms. 

Revenues for its two biggest divisions by sales, Risk and Scientific, and Technical & Medical (STM), rose 8% and 4% respectively. Legal revenues improved 6%. Demand for its smallest Exhibitions business continued to recover from the pandemic, climbing 30% year-over-year. 

RELX completed six small bolt-on acquisitions during 2023 at a cost of £130 million along with one small disposal.

Broker UBS reiterated its ‘buy’ stance on the shares post the results, flagging an estimated fair value price of £36.40 per share. The final dividend, if approved, is due to be paid to eligible shareholders on 13 June.  

ii view:

RELX is a broad-based data and publishing business. Its STM division is a global leader in academic publishing, with Risk offering data and analytical services mainly in the US. Legal is a key player in the legal information services market, while Reed Exhibitions is a big player in global exhibitions. The group employs more than 35,000 people with nearly half located in North America. 

For investors, the difficult economic backdrop for its customers cannot be ignored. An estimated 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.

On the upside, diversity of both operations and geographical regions exists. AI is now aiding its services. Bolt-on acquisitions in the past have supported growth, while the dividend has grown consecutively for more than 10 years with the estimated future dividend yield standing at around 1.8%.  

On balance, and despite relatively defensive growth not coming cheap, exposure to corporate data demand across a variety of industries is likely to keep fans of this major UK company optimistic for the long term. 

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

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