EUR 850.00 For Business Accounts Only

Morningstar | RELX Updated Star Rating from 21 Feb 2019

Narrow-moat RELX published a solid set of full-year results, with organic growth continuing apace at 4%, as currency headwinds pinned back headline growth to 2%. While revenue and operating profit were bang in line with our and the Street’s expectations, a lower-than-expected tax expense for 2018 led to a slight beat on our net income number. We do not expect to make any material changes to our long-term forecasts on the back of these results, nor to our GBX 1,510 fair value estimate. Given the strong run in the share price since the 2018 concerns over the journal business, we believe the shares are currently fairly valued.

Cycling effects in the exhibitions aside, every division within the group managed to either retain margins at their 2017 levels, or indeed improve them in 2018. Risk & business analytics continued to be the growth driver of the business, with organic revenue growth of 8% over the period. This division has now delivered close to this level of organic growth for the last seven years, with flagship product LexisNexis flanked by new acquisitions such as online fraud detection solution ThreatMetrix. Print revenue across the business continued their year-over-year decline and now represent just 10% of group revenue, down from close to 20% five years ago.

Higher value products such as decision-making tools not only differentiate RELX from smaller, less resourced, peers; they also increase subscription-based revenue streams and client integration, ultimately creating a more stable, predictable and higher margin business model. With a consistent capital expenditure/sales ratio of around 5% and further resources committed to small digital bolt-on acquisitions, we believe RELX should be able to retain its strong market position.