Stock of the week: Relx
Relx Group describes itself as a world-leading provider of information and analytics. In particular, it specialises in educational and scientific publications and its range includes the LexisNexis products.
The group has been going through some major restructuring, the majority of which is now over. These changes have seen it move away from its core trade journals base into one providing digital professional information services to doctors, lawyers and academics, along with exhibitions, including the London Book Fair.
Results in February saw the company report an increase in revenue to £7,355m and an operating profit of £1,905m. With management confident of delivering another year of revenue growth, the dividend was raised to 39.4p, which investors should appreciate was an increase of 10%.
Moreover, there has been impressive solid like-for-like growth across all of its divisions and an improvement in margins. Of its divisions, Risk Solutions, which provides information to help prevent and spot fraud, has shown the best growth.
Relx has stated it will buy back a further £700m of shares this financial year and there are growing hopes for further cash returns. When you combine this with the fact that new analytic tools for its databases, increased demand for risk assessment information, allied to its large data base, growth is likely to be maintained.
It’s therefore unsurprising that as a result of this, the share price has made impressive progress over the last five years, pushing it to an all-time high in November. However, the share price has fallen back giving what we believe investors a potentially better entry point to a company with a strong track record of sales growth.
As a result, we recommend Relx as a ‘buy’ for lower risk investors with a balanced portfolio.