Two LSE Stocks with a Diversified Business Portfolio - RELX PLC & Experian PLC

Summary

  • The British Retail Consortium reported that the shopping footfall declined 63 percent year on year in June 2020. However, the footfall improved by 19 percent as compared to May 2020.
  • RELX business performance in Q1 FY20 remained in line with the expectation; Exhibition segment negatively impacted due to cancellation and postponement of events.
  • RELX issued long term bonds worth €2 billion in March 2020.
  • Experian total global revenue declined by 5 percent due to the pandemic in April 2020.
  • Experian bought a significant stake in the Risk Management business of Arvato Financial Solutions.

Given the above market conditions, we will review two stocks - RELX PLC (LON: REL) and Experian PLC (LON: EXPN). Both REL and EXPN were down by 0.61 percent and 0.29 percent, respectively (as on 10 July 2020, before the market close at 9.30 AM GMT+1). Let's walk through their financial and operational updates to understand the stocks better.

RELX PLC (LON: REL) – Extensive portfolio to Support Business Growth

RELX PLC is a UK based company that provides information-based analytics and decision tools to professional and business customers. The Company has four business segments Scientific, Technical and Medical, Risk & Business Analytics, Legal and Exhibitions. The Company is listed in London, Amsterdam and New York with 265 offices in 39 countries.

Q1 FY2020 Trading Update (ended 31 March 2020) as reported on 8 April 2020

Scientific, Technical & Medical segment saw the limited impact of Covid-19 in Q1 FY20; the revenue growth was a slightly improved year on year. The increase in author-pays open access was good, while the subscription renewal rates for primary research met the Company's expectation. The growth of databases & tools revenue was steady; however, print book sales declined. RELX's subsidiary Elsevier that is into technical and medical content business is working closely with health institutions and providing databases to support medical response to Covid-19. Risk & Business Analytics segment performed well in the quarter compared to last year, although the transaction volumes softened for Insurance and Business services in the second half of March. The sales of Exhibitions segment were severely impacted as most of the events were either cancelled or postponed to later half of 2020; 5 percent of the events in Q1 20 were cancelled whereas 30 percent of the events were delayed which added additional costs.

Liquidity Position

RELX PLC issued long-term bonds worth €2 billion in March 2020; the total proceeds would be used for general corporate purposes. The Company also have undrawn credit facilities of USD 3.5 billion. As on 31 December 2020, the Company had a net debt of £6.2 billion. The Company completed the £150 million share buyback tranche on 22 April 2020 of the planned £400 million. The Company decided to discontinue the share buyback and review it later in the year.

Financial Performance in FY2019

(Source: Company Website)

Share Price Performance

6-Month Chart as on July-10-2020, before the market close (Source: Refinitiv, Thomson Reuters)

RELX PLC's shares were down by 0.11 percent against the previous day closing and trading at GBX 1,805.00 per share (as on 10 July 2020, before the market close at 1.21 PM GMT+1). Stock 52-week High and Low were GBX 2,109.00 and GBX 1,382.86, respectively. The Company had a market capitalization of £34.90 billion.

Business Outlook

The Company believes that business of Scientific, Technical & Medical and Legal could be impacted due to the difficulty to generate new sales and distribute print products. The overall revenue should be stable as subscription-based income of Scientific, Technical & Medical and Legal is 75 percent and 80 percent, respectively. The Risk & Business Analytics revenue would be dependent on market activity in the US. The outlook for Exhibition segment is highly uncertain and depends on the future advancement of events.

Experian PLC (LON: EXPN) – Good FY2020 performance in all operational geographies

Experian PLC is an Information Services Company, which helps to manage the data. The Company is involved in Data, Decisioning, Business-to-business(B2B) and Consumer Services business with operations in 45 countries and a total strength of 17,800 people.

FY2020 Annual results (ended 31 March 2020) as reported on 20 May 2020

The Company reported revenue of USD 5,179 million, which increased by 7 per cent year on year at the actual rate; the revenue was USD 4,861 million in FY19. The operating profit was up by 2 percent at the actual rate to USD 1,185 million. The profit before tax declined to USD 942 million from USD 957 million a year ago due to higher finance cost. The North America region generated revenue of USD 3,247 million and grew by 11 percent year on year. The UK & Ireland, Latin America and EMEA reported revenue of USD 769 million, USD 732 million and USD 431 million, respectively. Based on the business segment, the B2B segment generated revenue of USD 4,092 million, which increased by 9 percent year on year at constant currency.

As on 31 March 2020, the net debt stood at USD 3,898 million. On 20 May 2020, the Company announced a second interim dividend of 32.5 US cents per share for FY20, which translates to a total dividend payment of 47.0 US cents per share for the financial year.

Performance update for April 2020

The total revenue declined by 5 percent year on year. The revenue for North America was flat; however, the revenue in Latin America, UK & Ireland and EMEA fell by 5 percent, 15 percent and 22 percent, respectively. The Company acquired a majority stake in Arvato Financial Solutions for the Risk Management segment. Arvato is in credit bureau business with operation in Germany and Austria. The purchase of the stake would be fulfilled by the issue of 7.2 million shares of Experian PLC, which would cost approximately €185 million.

Financial Highlights FY2020

(Source: Company Website)

Share Price Performance

6-Month Chart as on July-10-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Experian PLC's shares were flat against the previous day closing and trading at GBX 2,789.00 per share (as on 10 July 2020, before the market close at 1.22 PM GMT+1). Stock 52-week High and Low were GBX 2,956.00 and GBX 1,823.50, respectively. The Company had a market capitalization of £25.57 billion.

Business Outlook

The Company believes three aspects would affect the business performance in FY21 - the impact on the economic activity due to restriction in movements; the consumer spending driven by the government stimulus packages, and Experian's effort to meet the changing needs of the customers. The Company's diverse portfolio of products and operation would be supportive.

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