RELX Plc Q1 FY2022 earnings call

Management Statement and Operational Highlights

• Financial Results: At constant currencies, revenue growth was 13%, adjusted operating profit growth was 16%, adjusted earnings per share growth was 14%. Interim dividend increased by 10%.
• Business Segments: All four business areas showed strong performance. Risk's digital identity solutions and recent acquisitions performing well. STM's primary research and Databases & Tools growing. Legal's electronic revenue and Lexis Plus uptake strong. Exhibitions rebounded with venue reopenings.
• Acquisitions and Buyback: Completed six acquisitions in H1 totaling £342 million, including BehavioSec, Flyreel, and Interfolio. Resumed share buyback, spending £300 million in H1.
• Cash Flow: EBITDA close to £1.5 billion. Cash conversion was over 100%, free cash flow was £889 million. Group CapEx was £192 million, equivalent to ~5% of revenue.

Segment Performance

• Risk: Underlying revenue growth was 7%, representing around 45% of divisional revenue. Digital identity solutions grew strongly, with ThreatMetrix and Emailage up ~20%. Recent acquisitions in financial crime compliance and behavioral biometrics are performing well.
• Insurance: Represents just under 40% of divisional total. Momentum improved in H1, with US auto market factors starting to improve.
• Specialized Industry Data Services: Represents just over 10% of divisional revenue. Saw strong growth overall, with strength in petrochemicals and aviation.
• Government: Represents just over 5% of divisional revenue. Strong growth driven by expansion of analytics and decision tools in state/local and federal markets.
• STM: Underlying revenue growth was 4%, underlying adjusted operating profit growth was 6%. Primary research articles grew, with ~40% growth in open access articles. Databases & Tools and Electronic Reference approaching 40% of divisional revenue.
• Legal: Underlying revenue growth improved to 4%, underlying adjusted operating profit growth was 6%. Electronic revenue (~90% of divisional total) grew, with strong uptake of Lexis Plus.
• Exhibitions: Revenue growth over 200% due to venue reopenings. Return to positive adjusted operating result with increased activity and lower cost structure.

Guidance

• Risk: Expect strong underlying revenue growth in line with historical trends, adjusted operating profit growth broadly matching underlying revenue growth.
• STM: Expect underlying revenue growth to remain above historical trends, adjusted operating profit growth slightly exceeding underlying revenue growth.
• Legal: Expect underlying revenue growth to remain above historical trends, adjusted operating profit growth continuing to exceed underlying revenue growth.
• Exhibitions: Expect strong underlying revenue growth for the year, with operating result benefiting from the structurally lower cost base.

Risks

• Economic Downturn: Potential impact on Risk division if industries served slow down significantly, though solutions offer value per transaction, with muted impact due to reduced exposure to recession-sensitive segments.
• Inflation: Impact on cost base, but process innovation and tight cost control aim to keep cost growth below revenue growth.
• China Exhibitions: Uncertainty due to city-by-city variations, but staying flexible and running events when possible.

Question and Answer

Q: 4% organic revenue growth in STM and Legal, could this be the new normal?

A: Strategic objective is on improving trajectory, no one-offs, value of products driving growth.

Q: Impact of US recession on Risk division?

A: Industries served might slow, but solutions offer value, muted impact due to reduced exposure to recession-sensitive segments.

Q: Pricing impact from inflation?

A: No pricing impact in H1, strategy to drive value to customers, trajectory might change slightly with inflation.

Q: China exhibitions status?

A: Running events flexibly, one in Shenzhen in June, staying flexible.

Q: Exhibitions recovery vs peers?

A: Difficult to compare, focusing on reopening and digital opportunity, seeing good demand.

Q: Capital allocation in H2?

A: M&A ongoing, buyback continues, considering interest rates and debt.

Q: Interest costs and tax rate?

A: Interest costs to increase with rising rates, tax rate in H1 a reasonable starting point for full year.

Q: Exhibitions recovery numbers?

A: Reopening, but hard to compare to peers, focusing on what's seen.

Q: Risk growth in H2?

A: No reason to think growth rate different, coming off less challenging comp in H2.

Q: Cost growth in Risk?

A: Managed through process innovation, cost growth aimed to stay close to revenue growth.