Friday newspaper share tips: RELX's 'boring reliability' a good reason to buy

“Boring reliability” is the main benefit to holding RELX shares, according to The Times’ Tempus.

The business information and analytics company posted a rise in 2015 revenue and operating profit as it announced a total of £700m in share buybacks for this year.

For the year ended 31 December, the group saw underlying revenue growth of 3% to £5.97bn, reflecting continued good growth in electronic and face to face revenues, partially offset by continued print revenue declines.

At the same time, adjusted operating profit increased 5% to £1.82bn, while reported profit after tax was up 6% to £1bn.

Tempus pointed out that the company’s revenues have risen 3% each year for the last five years, giving the copmpany its “boring reliability” status.

“Operating profits have risen by between 5 per cent and 6 per cent each year during the same period, as the company has shuffled out of magazines dependent on advertising revenue into the provision of data by subscription,” it also noted.

As a result, Tempus pointed out it has all added up to a surprising 45% growth in earnings per share for the last five years.

“RELX is one of those shares where you have to bite the bullet and accept the high multiple they trade on, worth it in the long term,” the column said.

For that reason it rated the shares at buy long term.

However, the column wasn’t so hot on Capita, advising investors to ‘avoid for now’.

For the year ended 31 December, the outsourcer reported pre-tax profit fell to £112.1m from £292.4m in 2014, as the company was hit by business exits and impairment charges.

During the period, Capita exited a number of small businesses, which either lacked strategic fit or had limited growth potential. It has three further businesses for sale of which one disposal completed last month.

On an underlying basis, however, before the cost of business exits and other non-underlying items, pre-tax profit was up 9% to £585.5m.

Meanwhile, revenue grew 7% to £4.67bn and the company lifted its total dividend per share to 31.7p from 29.2p.

Tempus said the market has taken a negative view of the company due to prospects for new work, which it believed is understandable.

“That pipeline stands at £4.7 billion, down from £5.1 billion a year ago, and the average contract length is down by two years to six years,” it said.

“So far this year, new work worth £251 million has been won, compared with £1.1 billion in the opening weeks of last year.”

While Tempus believed the company is well placed to benefit from more outsourcing in the long term, the shares are expensive at the moment.