RELX (LSE:REL) is probably the biggest company you have never heard of. With a market cap of £45.4bn, it ranks twelfth in the FTSE 100, sandwiched between the more familiar names of Reckitt Benckiser and National Grid.
Describing itself as “a global provider of information-based analytics”, RELX employs over 33,000 people and owns, amongst others, the Lexis Nexis brand, which provides software to help detect and prevent online fraud and money laundering, and ICIS (Independent Commodity Intelligence Services), which brings data, markets and customers together to create a “comprehensive, trusted view of global commodity markets”.
RELX reported a 2% increase in revenues to £7.3bn in 2021 and an impressive 20% increase in operating profit to £1.9bn.
This growth story has continued into 2022, with its half-year results showing a 16% rise in operating profit compared to the same period in 2021.
The returns to shareholders are also improving. RELX has declared a 10% increase in its interim dividend, and is more than halfway through a £500m share buyback programme, which is due to be completed this year.
The company is also on an acquisition spree and has bought six companies so far in 2022 for a combined consideration of £342m.
The share price is up 4.6% over the past two months and nearly 6% over the past year.
So has the time has come for me to become more acquainted with RELX and to make it a key component of my long-term portfolio?
I’m not so sure.
The price-to-earnings ratio is a lofty 30 and the dividend yield is not much over 2%. There seem to be better FTSE 100 bargains out there.
At 31 December, RELX had £113m of cash on its balance sheet but the company had to spend £920m on its dividend last year. Net debt (albeit falling) was 83% of annual revenue.
Underlying cash generation is good — more than twice that of the dividend — but with the continuing desire to grow through acquisition, the inevitable heavy capital expenditure required by a technology business and the ongoing share buy-back programme, there are many demands on the company’s surplus cash.
Maybe you have never heard of RELX because there is nothing much to say?
You wouldn’t think so if you read the 2021 annual report. The numbers don’t start until page 138 so there is plenty of the usual waffle. The word “risk” is mentioned 421 times and “compliance” features on 74 separate occasions. The annual report talks of its customer base (lawyers, insurance companies and governments), “near- frictionless identify verification” and “curated and connected” data solutions.
All this leads me to conclude that perhaps the real reason why you have never heard of RELX is because it’s a solid if unspectacular company. Dare I say it, a little boring.
But in these difficult times, maybe it’s time for me to become a little boring, shun the more famous members of the FTSE 100, and add RELX to my long-term portfolio?
After doing my research, I have decided to wait and see how RELX gets on during the second half of the year. The shares look over-valued to me, but the company is now on my radar and is no longer the mystery it once was.
