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29 Jul 2021
Beat and raise
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Beat and raise
RELX PLC (REL:LON) | 3,369 539 0.5% | Mkt Cap: 63,239m
- Published:
29 Jul 2021 -
Author:
Kassab Sami SK -
Pages:
10
Relx reported a solid set of H1 results
Relx (+) reported solid H1 results, with a 1% top-line beat, a 3% EBIT beat a 6% EPS beat. Organic revenue growth in Risk, STM and Legal were ahead of expectations, with Exhibitions broadly in line. Adjusted operating margins in STM and Legal came in higher than consensus forecasts and were broadly in line in Exhibitions.
FY21 outlook raised
Management has raised its guidance and now expects full year underlying growth rates in revenue and adjusted operating profit to be ''slightly above'' historical trends vs. ''in line'' previously. In particular, STM and Legal guidance has been revised up. STM organic revenue growth is seen as ''slightly above'' historical trends with adjusted margin expansion (vs. flat before). Legal organic revenue growth is seen ''at or slightly above'' historical trends. At the Q1 update, management had already guided for RBA to be slightly above historical trends.
Leaving the door open for a disposal of Exhibitions
Relx''s exhibitions division is in the midst of its digital transition. Once markets have normalised, we understand that management will look at the success of its digital strategy to determine whether it should keep or sell this asset. Reed Exhibitions has been operating at breakeven since April 2021 and we believe the Exhibitions newsflow is likely to improve in H2.
Outperform maintained
In recent months, Relx shares have had a lacklustre performance vs. peers and the market. We believe this is about to reverse as the market gains confidence in the improving top-line growth characteristics of the company. We have raised our EPS for 22 and 23 by 2% and see group organic revenue growth (excluding Exhibitions) at 5% in FY21 and FY22. H1 results underpin our positive stance. Relx trades on 20x PE22 and offers a 4.8% FCF yield 22e. We believe these are attractive levels and reaffirm our Outperform with a solid top-line recovery in Q3 as the next visible catalyst.