Media Fortune Fame & Folly

What next for RELX?

The Reed Business Information (RBI) division of the £32bn RELX Group is selling its Netherlands agricultural business media to a company being formed (curiously) by three prominent Dutch publishers. RELX will retain a minority share in the new company, Misset, founded by Derk Haank (ex CEO of Elsevier and Springer Nature), Cor Jan Willig (current CEO of specialist magazine publisher New Skool Media) and Luc van Os (current CEO of Hearst in the Netherlands).

The Boerderij farming publishing, information and events company has revenues of almost €30m and 140 employees. It’s a small deal for RELX but poses obvious questions about the rest of RBI’s Proagrica farming-food interests which include Farmers Weekly and Farmplan software in the UK. (Incidentally, the Dutch deal also comes at a time when Informa is believed to be selling its AgriBusiness information services.) But it also reflects RELX’s increasing emphasis on its US-based Risk & Business Analytics (RBA) whose Lexis sophisticated systems help banks to spot money launderers and insurance companies to weed out fraudulent claims.

RBA claims to have saved the state of Florida more than $60m a year by preventing benefit fraud. The company’s strategy is to : Evaluate and mitigate risk; prevent fraud and cybercrime; and enable commerce. Pumped up by a billion dollars of acquisitions, it’s worlds away from UK-based brands like Flightglobal, Farmers Weekly and Estates Gazette which, for all the digital systems and successful consulting businesses, are linked to a hazy past when the sprawling Reed International, incredibly, straddled print, paper, publishing and paint.

It had become the world’s largest publisher of consumer, business and specialist magazines and scientific journals. Then came the wholesale sell-offs of manufacturing and consumer publishing, and an initially bumpy merger with STM publisher Elsevier.

Only the name Reed Business Information connects the company to distant days when the profits of B2B weeklies were turbocharged by jobs advertising. But RBI’s current numbers tell the story of a company whose 2017 revenue of £278m was static with operating margins which fell from 20% to 15%, with sharp rises in people costs. The results are stodgy even if they do represent a complete transformation over the past 10 years from print to digital. But RBI is only some 15% of RBA.

The US-based RBA accounts for some 25% of RELX revenues and 35% of the profits. With underlying growth of 8%, it’s fast becoming the star business. Its revenues are 95% electronic, 80% from North America, and 63% from digital subscriptions. Just 2% of the revenue is from advertising, 3% from print and 15% comes from Europe but those less-desirables are almost wholly accounted for by RBI.

It’s the same kind of detachment felt by the executives of Reed Exhibitions which is the smallest division of RELX whose self-description as a “global provider of information and analytics” seems to ignore its very existence. These may be among the signs that these two well-managed businesses will sometime be sold-off. In their different ways, they represent a distraction from the brilliant RELX group which has increased revenue and operating profit by 21% and 47% in the eight years since former Elsevier science boss Erik Engstrom became CEO. That was the year also that Reed lifer Mark Kelsey, now head of RBA, became CEO of RBI and accelerated its transformation from print to data. Now, Kelsey’s RBA is fast becoming RELX’s best-performing business – even before renewed legal and industry attacks on the parent company’s egregious profits from scientific publishing.

Corporate strategies are often conducted in plain sight and RELX people talk long and loud about science, risk, banking, insurance, and legal; not much about business information or exhibitions. While some of the RBI databases in business sectors have a broader relevance to the RBA strategy, divestment of much of the single-sector business information would enhance overall performance. So we can guess what’s coming as RELX completes its journey from media company to data-tech. It’s succeeding through robust global strategies, high-quality management and long-term investment. It’s become a smart and surprising contrast with longtime peer Pearson Plc whose market cap is now less than 25% of RELX.

Reed Exhibitions (which accounts for 15% of RELX revenue) may be first on the block simply because of the sheer demand for exhibitions that is pushing prices towards 20 x EBITDA. But, perhaps, the other remnant of the Reed International publishing past will not be too far behind. The fact that RBI and Reed Exhibitions are strong successful businesses almost creates the incentive to cash in. For RELX, it’s all about focus.