ii view: RELX does well but misses estimates

Data analytics company RELX enjoyed growth across all four businesses, but some shareholders are selling up.

Half-year results

• Underlying revenue up 3% to £3.88 billion
• Adjusted operating profit up 8% to £1.24 billion
• Interim dividend up 10% to 13.6p per share

Chief executive Erik Engstrom said:

"RELX continued to make good progress in the first half of 2019, with underlying revenue and adjusted operating profit growth across all four business areas, and recent acquisitions performing well. As we enter the second half of 2019 key business trends for the full year are in line with the full year 2018."

ii round-up:

RELX (LSE:REL) is a global provider of information-based analytics and decision tools for professional and business customers. 

It has offices in about 40 countries, employing over 30,000 people of whom almost half are in North America, but serves customers in more than 180 countries. Its four divisions are: Scientific, Technical & Medical - its largest by 2018 sales - Risk & Business Analytics, Legal and Exhibitions. 

In 2018, RELX simplified its corporate structure into a single parent company, removing complexity and increasing transparency for shareholders. 

With a bigger stock market value than Informa (LSE:INF) and Pearson (LSE:PSON) combined, RELX has been busy reshaping its business portfolio and targeting selective acquisitions to supplement organic growth. During the first half of 2019, RELX completed eight acquisitions of content, data analytics and exhibition assets worth £246 million in all, and sold five assets for £45 million.

But half-year results missed analyst expectations. Underlying revenue growth fell marginally short of forecasts, blamed on both its Scientific, Technical & Medical and Risk & Business Analytics divisions. 

The share price was down over 2.5% in midday UK stock market trading. 

ii view:

RELX's diversity of business and global customer base are clearly core strengths. A focus on reshaping its business portfolio also helps a return on equity – a measure of how good the company is at generating profit from the equity invested – of 72.5%, above the three-year average of nearer 65%. 

RELX shares have been a solid performer during this bull market, while a progressive dividend policy and share buy-back programme add further shine. It is worth keeping an eye on that net debt figure though.  

Positives: 

• Full-year outlook unchanged
• £600 million share buyback programme
• Interim dividend up 10% will please income seekers

Negatives:

• Worries about university contracts lost deal at firm's publishing arm Elsevier
• Group net debt rose to £6.6 billion (£6.2 billion) as at 30 June 2019
• Currency movements can impact

The average rating of stock market analysts:

Buy