RELX Plc Q2 FY2024 earnings call

Management Statement and Operational Highlights:

• Strong financial results: Underlying revenue growth 7%, underlying adjusted operating profit growth 10%, adjusted earnings per share growth 10% at constant currency. Interim dividend increased by 7%.
• Acquisitions and share buyback: Spent £61M on two acquisitions in H1, deployed £700M of £1B share buyback program.
• Business mix shift: Ongoing shift towards higher growth, higher value analytics and decision tools across segments.
• Margin improvement: Adjusted operating margin improved to 34.1% due to cost growth below revenue growth in business areas.

Segment Performance:

• Risk: Underlying revenue growth 8% and underlying adjusted operating profit growth 9%. 90% of divisional revenues from machine to machine interactions. Business Services (~45% of divisional revenue) growth from Financial Crime Compliance and digital Fraud & Identity solutions. Insurance (~40%) growth from solution set expansion. Specialized Industry Data Services (~10%) growth led by Commodity Intelligence and Aviation.
• STM: Underlying revenue growth 4%. Shift in business mix towards higher growth segments; Print revenue shrinking, electronic revenue growth improvement offsetting.
• Databases, Tools & Electronic Reference and Corporate Primary Research: ~45% of divisional revenue, growth from higher value add analytics. Primary Research, Academic & Government segments: ~45% of divisional revenue, driven by volume growth (articles submitted up >20%, published up 15%).
• Legal: Underlying revenue growth 7% (up from 6% last year), driven by shift to higher-value legal analytics. Underlying adjusted operating profit growth 9%. Law Firms & Corporate markets (~60%) Lexis+ (extractive AI) performing well; Lexis+ AI (generative AI) rollout progressing.
• Exhibitions: Underlying revenue growth 16%, margin improvement due to strong revenue growth and lower cost base.

Guidance:

• Overall: Expect continued strong underlying revenue growth, with underlying adjusted operating profit growth slightly exceeding revenue growth. For Risk, STM, Legal: continued good underlying revenue growth, with operating profit growth exceeding revenue growth. For Exhibitions: strong underlying revenue growth and improvement in adjusted operating margin over prior year.

Risks:

• Print decline in STM: Print revenue shrinking faster than usual, impacting STM's growth temporarily.
• Currency effects: Impact on revenue and profit due to sterling strength relative to prior year.
• Industry challenges: Potential impact of industry research integrity issues on STM article submissions and revenue, though company has lower exposure.

Question and Answer: Q: Pace of Lexis+ AI rollout in Legal segment, impact on customer uptake and legal firms' tech budgets A: Lexis+ AI rollout started late last year, new sales and renewals increasingly from Lexis+ AI. Legal firms are evaluating tech evolution, but impact on budgets is early to determine.

Q: STM Print decline, expectation for second half, and article submission growth impact on Primary Research revenue A: STM Print decline likely to continue, not expecting reversal in H2. Article submission growth in H1 (over 20%) has started to impact, but payment models and subscription agreements may moderate direct revenue impact in H2.

Q: Growth objectives for Legal segment, competitive landscape in legal tech, and capital allocation to Exhibitions A: Legal segment aims to continue improving growth trajectory. Actively involved in legal tech, focusing on organic value add. Exhibitions growth driven organically with focus on digital tools, no material capital allocation planned for external acquisitions.