Have you heard of RELX? A lot of people haven’t. A cursory browse of Google Trends suggests there is less “search interest” for RELX than virtually any other major company in Britain.
But RELX is fast becoming a business worth knowing about. The firm, which prides itself on its humble low profile, is on the cusp of crossing the $100bn market cap mark for the first time, which would make it only the second British tech firm to do so after chip designer Arm hit the milestone last year.
Its shares have jumped eightfold since 2010 to make it the seventh-most valuable constituent in the FTSE 100, as well as the fastest-growing of the top ten.
“The favourite thing I have in terms of looking at their track record is they do a ten-year slide every time they do results, and it has the revenue growth, the CapEx, the M&A spend and the buybacks, and they’re all just very steady,” said John Davies, TMT equity research analyst at Bloomberg Intelligence.
“The predictability of the business has been something that has been there for at least ten years [but] the newer enthusiasm does spring from their ability to greatly increase the growth rate of their revenue.
“It used to be that they were a steady 4% revenue growth company which is pretty good in a low interest rate environment and across multiple time periods. But they’ve now moved that forward to 7-8%.”
At the core of RELX’s rising revenue growth has been its huge digital transformation. Two decades ago, the firm scarcely resembled a tech company. It was best known for being a publisher — of legal records, academic papers, books and magazines.
Until 2006, the majority of RELX’s revenues derived from the sale of print products. Now that figure stands at just 4%.
Part of that shift can be explained by the divestment of a number of print products over the years — such as the US magazine variety, and a publisher of children’s books — as well as digitisation of things it still owns. But much stems from the innovative ways the company has been able to extract so much more value from the vast data sets it already holds.
The case in point is the transformation of the firm’s legal division, says Davies.
“Legal if you go back quite a way was essentially a big fat very well curated and very highly indexed database. Originally it was a paper-based thing but then it went online. But it was effectively just “here’s a slug of data, have at it.”
“Over the last few years they’ve moved into being able to ask it questions, and be able to say things like. “looking at the track record of this judge or this court, what are our chances of getting something through along these lines.”
“It’s like a lot of the LLM stuff, you can think of it as being a good intern, and they’re hoping I think to get it up from good intern to good first or second year lawyer.””
The use of AI and machine learning has propelled the legal division, which accounts for around a fifth of RELX’s total turnover, from seeing 2% revenue growth to more than 6%. And the new tools has helped it attract a very sophisticated client base.
“They’re not selling this to the high street solicitor,” Davies says, “they’re selling it to the big law firms and they are paying for results – so if you’re saving them time they’ll be happy to use it.”
The same strategic shift has occurred throughout the various sections of the business, which includes its risk division, working with insurance firms, as well as its corporate events and conference business.
RELX has, in other words, been able to keep its core business the same while delivering much more value from it — a shift which has investors purring.
They are also likely to be pleased by the lack of flashy corporate practices and the relative stability of the team.
CEO Erik Engstrom has been in his role for more than 15 years — about triple the average tenure for a FTSE 100 company — and has no plans to stand down just yet. He is known for cutting a quiet, modest figure, having never given an on-the-record interview with a journalist (and he never will, I am told).
Chief Strategy Officer Shweta Vyas has been with the company since 2010, starting the year after Engstrom became CEO.
“I joined RELX out of a management consulting firm,” she tells UKTN. “I fully anticipated staying for two years and then moving on as you do.”
“The reasons I’ve stayed is first and foremost the culture. It’s such a great environment to work in. It’s very supportive, collaborative, there’s excellent opportunities for career growth and I’ve taken advantage of a lot of them.
“It’s this focus on innovation and continuing to drive values for our customers — the business really is customer obsessed.
“In my consulting days you could see large companies with strong positions in markets get complacent, and it’s never felt like that, there’s always this challenge of what else, what more we could be doing.”
Shareholders may also be pleased with an apparent culture of frugality of the firm. There is no corporate private jet or limo, and Erik, who is known to go to Itsu for lunch, regularly flies economy. The company’s London headquarters has not had any refurbishment work done in several decades.
“I don’t think it’s frugality for the sake of frugality, says Vyas, adding that she’s been to Itsu for lunch a couple of times herself since moving to London last year, but mainly brings her lunch in from home.
“Our focus is on spending money and investing money back into the business to drive value. But there isn’t a lot of fluff and bells and whistles.”
One major obstacle stands in the way of RELX seeing even faster growth: someone who also happens to be the richest person on the planet.
Earlier this year, Elon Musk joined the Trump administration to head up a new unit at the White House: the Department for Government Efficiency or DOGE, which has vowed to cut as much as $1tn from US federal spending by finding savings.
Spending on private sector contracts seems to be among the lowest hanging fruit. As recently as this week, DOGE boasted that it had identified millions in unused subscriptions to third party software, which it would now be cancelling.
That puts RELX on the firing line. Government contracts account for around a fifth of the company’s total revenues, with the lion’s share of that coming from the US. Over the past month, RELX shares have fallen by around 10%, wiping out the gains the stock made in January, with the activities of DOGE thought to be a major contributor to changing investor sentiment.
“It’s impossible to say what’s going to happen [with DOGE] because anyone that says they know what’s going to happen the last few weeks has been wrong,” Davies says.
“[But] You’re going from somewhere where [the US government] was arguably the best customer to have in some ways to not being the case any more. This bumps up the risk of it being a bit difficult.”
But, says Vyas, the emergence of DOGE is also an opportunity to help the government find efficiencies.
“We do work quite closely with the US government and we’re trying to find ways to continue to work closely with the government to create more efficiency [like] making sure that when consumers are trying to access government benefits or government programmes, the right people are flowing through easily.
“There have been some congressional briefings that we’ve been part of to hopefully show that there’s a way to systematically address some of the challenges around fraud waste and abuse that we’re seeing in the government.”
Regardless of what happens with its government contracts, RELX remains a diversified business which does not depend on any one market for growth. Nor is it one that depends on investor hype around any shiny new technology. Instead it can continue delivering its core business to more and more customers.
“There’s a whole bunch of investors who are happy with them,” says Davies.
“It is a bit boring. But boring can be good.”
The post ‘A bit boring – but boring can be good’: Why RELX is set to be Britain’s next $100bn tech firm appeared first on UKTN.
