Comic Con’s Owner Is No Joke. How This Publisher Is Morphing Into a Data Powerhouse.
Information provider RELX has been busy transforming itself from an old school publishing empire into a tech giant.
The owner of diverse businesses, including The Lancet medical journal and Comic Con comic book festival, is digitizing its academic journals and publications, giving lawyers and doctors more data-crunching analytical tools.
Barron’s last recommended RELX stock (tickers: REL and REL.UK) in March 2019, when the share price was at 16.57 pounds sterling ($19.80), saying “the upside seems worth it.” The shares have increased 39% to £23.11 but could have still further to go.
One of the most exciting growth stories is in the company’s cash-generative but non-core events business. While it only accounts for 10% of sales in the first half of the year, demand for face-to-face shows is robust. The business is in even better shape than in pre-Covid times because of a focus on the strongest performing shows, while about 10% of the weakest events have been axed. It is also expanding into online events, which have lower costs.
Covid-19 forced almost all conferences to be canceled, but the events division has enjoyed a strong recovery and is back to around 80% of prepandemic levels. RELX, formerly known as Reed Elsevier, also thrives in recessionary times because it has shifted away from hard-hit advertising to a subscription model.
Konrad Zomer, an analyst at French-German broker Oddo, forecasts the events business will see revenue of €1.365 billion ($1.46 billion) in 2024, an 8% increase from 2019’s €1.269 billion. He noted that most events between August and October—important months in the event calendar—went ahead according to plan.
Zomer predicts the shares will increase about 23% to £28.73 because the company remains on track to achieve above-average revenue and earnings growth in both 2022 and 2023.
“RELX has a subscription-based recurring revenue business model, is already highly digitized, has a strong market position and track record, and generates significant free cash flow (conversion close to 100%),” he wrote in a recent note.
Two of RELX’s business divisions are based in the U.S., along with a large chunk of the earnings, which means a 10% stronger dollar versus sterling adds some 7% to 9% to adjusted earnings per share, Zomer estimates.
The core business is its online legal and medical analytics business, which provides legal and medical insights. This helps clients by telling them, for instance, which judges are more likely to rule in their favor. The offerings help combat fraud and money laundering. The medical data can show which research areas receive the most funding.
Growth in the division has typically been around 1% to 2% but increased to 3% in 2021, says Sarah Simon, an analyst at Berenberg. “Management has attributed this to higher adoption of analytics, which are sold on a subscription basis, so the revenue is likely to recur,” she wrote in a note.
RELX has a market value of £43.6 billion. It fetches a multiple of 20.1 times this year’s expected earnings and is valued in line with its peers.
For the six months ended June 30, RELX posted profit before tax of £998 million, up from £825 million for the year-ago period. Revenue was £4 billion, up from £3.4 billion.
Full-year growth rates in revenue and adjusted operating profit are expected to remain “above historical trends,” CEO Erik Engstrom said when earnings were released. “Momentum remains strong across the group,’’ the company said in an October update.