ii view: RELX suffers but maintains the dividend

Exhibitions have been hit, but science, medical and legal information provision all proved resilient.

Half-year results to 30 June 2020

• Revenue down 10% to £3.5 billion
• Adjusted operating profit down 24% to £939 million
• Interim dividend unchanged at 13.6p per share
• Net debt, including leases, up 14% to £7.5 billion

Chief executive Erik Engstrom said:

"Despite the challenging environment, RELX has continued to pursue its strategic priorities successfully. Although earnings per share progress has been impacted by Covid-19 related disruption to our exhibitions business, we have announced an unchanged interim dividend of 13.6p reflecting the resilience of our three largest business areas and our strong financial position and cash flow. We also continued to build on our strong ESG performance, with Elsevier in particular supporting the scientific and medical response to Covid-19 with free downloads from the Elsevier Novel Coronavirus Information Centre now exceeding 100 million."

ii round-up:

Information group RELX (LSE:REL) today reported a move into losses for its exhibitions division, impacted by cancelled face-to-face events under coronavirus restrictions across much of the world. 

But its other three divisions specialising in information for science & medical, risk & business analytics and legal, and accounting for over 80% of both sales and profits, all remained resilient. 

A half-year dividend of 13.6p per share, matching that paid last year, was declared. 

RELX shares fell by more than 4% in early UK trading, having fallen by around 10% year-to-date. Shares for rival events organiser Informa (LSE:INF) have halved in 2020 while financial media concern Euromoney Institutional Investor (LSE:ERM) has seen its shares fall by around 40%.  

Sales for exhibitions fell by 71% to £201 million, with a loss of £117 million made. Sales for the rest of the business improved by 3% to £3.3 billion. Electronic revenues, which management has been pushing towards, rose by 3% to 4%. Print sales fell between 17% and 19%, hit by distribution issues under the pandemic. 

It has now reopened nearly half its offices. Around half its 30,000-plus staff, half of whom are based in North America, now have the option to work from the office. 

During the year-to-date, RELX made seven acquisitions of content, data analytics and exhibition assets at a cost of £720 million. In April, it suspended its share buyback programme having spent £150 million. It does not intend to resume the programme this year and continues to offer no full-year financial guidance given the uncertain outlook. 

ii view:

Formerly known as Reed Elsevier, RELX’s diversity of business and global customer base offer core strengths. It serves customers in more than 180 countries and has offices in around 40. Its Scientific, Technical & Medical (STM) division last year generated a third of sales, Risk & Business Analytics just under a third, Legal around a fifth and the now Covid hit exhibitions at 16% of sales and 13% of adjusted operating profit. 

During 2019, North America proved its biggest geographical region at just over half of group sales, with Europe and the UK accounting for around a fifth each and the balance made by the rest of the world. A move towards electronic data now sees it accounting for 92% of sales for its three information divisions. 

For investors, the hit to performance from Covid induced disruption at its exhibitions business is clearly unwelcome. An inability to offer full-year financial estimates or guidance also warrants caution. But some exhibition events have recommenced in China, while some rivals have looked to substitute face-to-face with virtual events. An estimated dividend yield of around 2.5% (not guaranteed) is also not to be overlooked in a low interest rate world. For now, RELX’s resilience continues to warrant consideration for long-term investors.

Positives: 

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

Negatives:

• Covid hit exhibitions business 
• Group net debt stands at £7.5 billion as of 30 June 2020

The average rating of stock market analysts:

Buy