RELX : Earnings Document

RELX Interim Results

2021

Thursday, 29th July 2021

Interim Results 2021

Thursday, 29th July 2021

Introduction

Erik Engström

CEO, RELX Group

RELX H1 2021 Progress

Financial performance

Good morning, everybody. Thank you for taking the time to join us on our call today. As you may have seen from our press release this morning, we delivered a strong first half, with underlying growth trends across almost all market segments returning to the improving trajectory that we saw in the early part of 2020.

Operational and strategic progress

We made good operational and strategic progress, investing behind our strategic priorities to drive organic growth through development of analytics and decision tools across segments, with recent acquisitions performing well. We also continued to build on our strong ESG performance, making good progress on many of our internal metrics and maintaining or improving our key external ratings.

H1 2021 financial highlights

In the first half, revenue growth at constant currencies was 4%. Adjusted operated profit growth was 11%. Adjusted earnings per share growth was 10%. And we announced an increase in the pound sterling interim dividend of 5%. Our three largest busines areas, all delivered improved underlying revenue growth in the first half. So let's look at the results of each business area.

Revenue by business area

Risk

In Risk, underlying revenue growth was 10%. Underlying adjusted operating profit growth was 12%. Transactional revenue, which represents around 60% of the divisional total, grew in the double-digits in the first half, and volumes in most segments continue to develop strongly against both the disrupted first half of 2020 and the first half of 2019.

Subscription revenue, which represents around 40% of the divisional total, and where last year's disruption was more second-half weighted, have seen a more recent return to historical growth rates, driven by strong new sales across markets.

In Business Services, which represents nearly 45% of divisional revenue, double-digit revenue growth was driven by strong demand across almost all market segments. Fraud and Identity our leading digital identity solutions performed particularly well, with both ThreatMetrix and Emailage continuing to see growth of around 30%.

In Financial Crime and Compliance, last year's alignment of Accuity within Business Services has significantly strengthened our customer proposition through the sharing of technology platforms and data, and will enable an accelerated roll-out of new decision tools.

In Insurance, representing nearly 40% of the divisional total, strong revenue growth was driven by the continued roll-out of enhanced analytics and expansion of adjacent verticals.

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Interim Results 2021

Thursday, 29th July 2021

Our customer markets have seen a recovery since the disruption in March and April of last year. Muted auto insurance shopping growth fluctuated somewhat, but overall for the first half was in line with recent years. US driving activity has continued to recover and is currently over 95% of 2019 levels, up from a low point of around 50% in April of last year. And claims volumes are following a similar trajectory.

In adjacent verticals, we have seen strong growth in home and life insurance, as customers seek alternative data sources in automation of the application and underwriting processes.

In Data Services, which represents just over 10% of divisional revenue, we saw continued strong growth in petrochemicals and agriculture, whilst other segments such as aviation are now in the early stages of recovery.

In Government, representing around 5% of divisional revenue, strong growth was driven by the continued expansion and roll-out of analytics and decision tools across both state and local and federal markets.

Going forward, we expect underlying revenue growth slightly above historical trends, with underlying adjusted operating profit growth broadly matching underlying revenue growth.

Scientific, Technical & Medical

In STM we saw underlying revenue growth of 4%, driven by continued good growth in electronic revenue, which represented 88% of the total. Print revenue, representing 12% of the total stabilised, following particularly steep declines in the first half of last year.

In Primary Research, the number of articles submitted to our journals remained at last year's elevated levels, and strong growth in the number of articles published drove market share gains in both subscription and open-access payment models. As you know, we're always very happy to serve our customers with whatever payment model they prefer, and our aim is to help them achieve their objectives in a way that gives them higher quality and better effective value from us than they can get from other major providers.

Our relative quality advantage in each sub-segment has been consistently maintained or increased. And growth is article usage has remained strong on all key measures. So far this year, we've launched another 55 author pays open access titles, bringing our open access journal count to over 560. And our subscription renewal completion rates and new sales are in line with historical trends.

Databases & Tools and Electronic Reference, which represents over a third of divisional revenue, showed strong growth in medical education, clinical solutions and electronic reference. This was driven by increased production of digital tools, including advanced simulation training, continued geographical rollout of ClinicalKey, and strong growth in evidence-based decision support tools, including ClinicalPath.

Print books, which now represent a little over 5% of divisional revenue in the first half, stabilised after last year's unusually steep first-half declines.

Going forward, we expect underlying revenue growth slightly above historical trends, with underlying adjusted operating profit growth slightly exceeding underling revenue growth.

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Interim Results 2021

Thursday, 29th July 2021

Legal

In Legal, underlying revenue growth was 3%, with underlying adjusted operating profit growth ahead of revenue growth at 6%, reflecting further process innovation.

Electronic revenue, representing 88% of the divisional total, has continued to grow well. And print revenue declines moderated following unusually steep declines in the first half of last year.

In North America, which accounts for around two-thirds of divisional revenue, growth across all key market segment was driven by the development and roll-out for legal analytics and new integrated functionality.

Last September we launched Lexis+, using machine learning and natural language processing to unite multiple legal research and analytic functions, delivered through a modernised user interface. We've seen positive uptake across all customer segments, with almost all new customers and the majority of renewing customers opting for Lexis+.

Trends in our major customer markets are stable, renewal rates holding up well, and new sales currently running ahead of recent years.

Going forward, we expect underlying revenue growth in line with or slightly above historical trends, with underlying adjusted operating profit growth exceeding underlying revenue growth.

Exhibitions

Exhibitions revenue declined 36% in constant currencies for the first half as a whole, but has been running ahead of last year since April. The physical events that we were able to hold in the first half have mostly been in China and Japan, and more recently in the US and elsewhere. They have generally been well received by both exhibitors and attendees, and have all been supported by digital initiatives. Nick will take you through the details for Exhibitions' revenues and costs in a few minutes.

Going forward, the revenue outcome for the full year will depend on the pace and sequence of reopening. The operating results will benefit from a significantly lower cost structure than in the prior year.

Operational and strategic process

Our operational and strategic priorities, which are the drivers of our improved performance, are unchanged. In the first half, we continued to make good progress across market segments on our number one strategic priority: the organic development of increasingly sophisticated analytics and decision tools that deliver enhanced value to our customers and help them make better decisions, get better results and be more productive.

Our organic growth strategy is supported by targeted acquisitions. In the first half, we made five small acquisitions and recent acquisitions continued to perform well. We remain committed to our corporate responsibilities, drawing on the unique contributions that we're able to make as a business. And in the first half, we saw further improvement in our internal metrics and in the external recognition of our efforts.

With that, I will now hand over to Nick Luff, our CFO, who will talk you through our results in more detail. I will be back afterwards for a quick wrap-up and our usual Q&A.

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Interim Results 2021

Thursday, 29th July 2021

Financial Overview

Nick Luff

CFO, RELX Group

H1 2021 financial highlights

Income statement highlights

Thank you, Erik. Good morning, everyone. Let me start by providing more detail on the Group financials.

Revenue growth for the period was 4% at constant currency, reflecting the strong performance of Risk, STM and Legal. Adjusted operating profit growth was 11% at constant currency, with all four busines areas showing improved results. The adjusted operating margin improved to 30.1%. The improved profit performance flow through to adjusted earnings per share, which are up 10% at constant currency.

Cash flow and balance sheet highlights

Cash conversion was strong at 112%, contributing to a significant reduction in leverage to 2.8 times, including leases and pensions, down from 3.3 times at the end of 2020. Given the strong overall performance, we've been able to increase the interim dividend by 5% to 14.3p.

Revenue

Looking at revenues, underlying growth trends in our three largest business areas returned to the improving trajectory that we saw in the early part of 2020, with Risk at 10%, STM at 4% and Legal at 3%. Given the extent of event rescheduling during the year, underlying measures are not meaningful for Exhibitions for the first half, and hence not for the Group as a whole.

Portfolio changes were a small net positive for Risk, but within the rounding, a small positive for STM and a small negative for Legal. We generate the majority of our revenue in dollars, of course, and with the sterling stronger on average against the dollar as well the euro compared with the first half of last year, currency movements were a drag on sterling reported growth rates of between 4% and 8%, with Group revenue down 3% in sterling.

Adjusted operating profit

On adjusted operating profit, Risk and Legal delivered underlying growth slightly ahead of underlying revenue growth, with some benefit from phasing of expenses. For STM, adjusted operating profit growth was in line with revenue growth. Portfolio effects on adjusted operating profit were broadly neutral in the three largest business areas.

Exhibitions improved its operating results, despite lower revenues, with an adjusted loss of £48 million compared to £66 million in the prior first half. You will recall that in 2020 we incurred exceptional costs in Exhibition, with £51 million falling in the first half, mostly related to cancelled events. The first half 2020 comparative figure shown here excludes that exceptional cost. There were no exceptional costs in the first half of this year.

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