Daily Telegraph1 Jul 2015 08:58
Hold Reed Elsevier: Relx has managed to secure a strong position in the digital age that leaves revenue and profits looking far more secure, and the shares a better long-term bet for investors. The Anglo-Dutch group, formerly known as FTSE 100-listed media group Reed Elsevier, collects information used by professionals such as lawyers and accountants. RELX has a small army of specialists collecting data and then building a database that can easily be searched. The other opportunity for growth at RELX is in the field of science, where getting your findings published first can be the difference between success and failure. The business model has good dynamics. RELX is forecast to generate £1.7 billion in pretax profits, from £6.1 billion of revenue in the year to the end of December. The profit margin of about 30% should be defendable as it is difficult for competitors to copy the army of researchers who have the technical knowledge required. The accounting and law industries are exposed to economic downturns, when layoffs will reduce subscription revenue. However, the shares, trading on 18 times forecast earnings, falling to 17 times next year, don’t look overly expensive. Questor says “Hold.”