Earnings Call: H1 2017

Jul 27, 2017

So good morning, everyone, and welcome to Rolex's interim results presentation for 2017. As a whole, with each of our 4 business areas again contributing positively to sales and profit growth. Adjusted earnings per share in constant currency was again 8 percent, adjusted earnings per share in euros was also 8%. Sterling adjusted earnings per share was up 19%, reflecting the first half weakness of the pound relative to the first half of twenty sixteen. We've announced a dividend increase of 8 percent in euros 14% in sterling, reflecting the spot exchange rates. I'm also pleased to report that today we announced the appointment of Suzanne Wood to our Board, subject to shareholder approval at the Netherlands EGM in late September. Suzanne has been Group Finance Director of Ashtead Group Plc, a Mid FTSE 100 International Equipment Rental Company for 5 years, prior to which she was CFO of Ashtead's largest subsidiary, Sunbelt Rentals in the U. S. A U. S. Citizen who started her career with Pricewaterhouse, Suzanne brings over 20 years experience in senior finance roles, including as a CFO of 2 publicly listed U. S. Companies prior to taking up her current roles at Ashden. She'll bring valuable and highly relevant experience to our boards as we continue to evolve and refresh them and I look forward to working with her. Thank you. Eric and Nick will now take you through the results in detail. Thank you, Anthony. Good morning, everybody. Thank you for taking the time to be here today. As you've probably seen from our press release this morning, our positive financial performance continued in the first half of twenty seventeen, with underlying revenue growth across all four business areas and with underlying profit growth ahead of underlying revenue growth. We also made further strategic and operational progress, and the organic development of increasingly sophisticated analytics and decision tools remains our number one priority. Underlying revenue growth was 4%. Underlying adjusted operating profit growth was 5% and earnings per share growth at constant currencies was 8%. All four business areas again delivered underlying revenue growth as well as underlying operating profit growth. So let's look at the results for each business area. Our STM business grew 2%, in line with prior year, with key business trends remaining positive. In Primary Research, which represents just over half of the division's revenues, we continue to enhance customer value by building out broader content sets, more sophisticated analytics and evolving our technology platforms. We saw continued good growth in databases and tools and in electronic reference across segments. Print books, which now represent less than 10% of Elsevier's revenues, saw revenue declines in line with historical first half declines and print pharma promotion revenues declined moderately. Going forward, our customer environment remains largely unchanged. Overall, we expect another year of modest underlying revenue growth with underlying profit growth continuing to exceed underlying revenue growth. Risk and Business Analytics grew 8%, in line with the first half of the prior year and revenue growth remained strong across all key segments. In Insurance, which represents about 40% of the division's revenues, growth was driven by enhanced analytics, extension of data sets and by further expansion in adjacent verticals, albeit in a market environment that was not quite as favorable as in the first half of the prior year. The international insurance initiatives continued to progress well, with the continued growth of telematics in several countries and the establishment of a local presence in Spain in addition to U. K. And Ireland, China, Brazil and India. In Business Services, which represent about a quarter of the division's revenues, growth was driven by further development of analytics across the financial and corporate sectors in a positive market environment. We now have business service customers in over 100 countries and operations or sales offices in 15 countries. The government and health care segments continue to develop more sophisticated analytics and other data services continue to drive growth through organic development and focus on the integration of recent acquisitions. Going forward, the fundamental growth drivers of risk and business analytics remain strong. We continue to expect underlying profit growth to broadly match underlying revenue growth. Legal revenue growth of 2% was in line with the prior year. Continued growth in online revenues was partially offset by further print declines. The rollout of new platform releases continued across our U. S. And international markets with broader data sets and the expansion of early stage legal analytics. U. S. And European markets remained stable but subdued, while other international markets continued to grow well. Underlying profit growth was strong. The margin increase reflects organic process improvements and decommissioning of systems, largely offset by lower profits from joint ventures and other portfolio effects. Going forward, trends in our major customer markets are unchanged, continuing to limit the scope for underlying revenue growth. We expect underlying profit growth to remain strong. Exhibitions achieved underlying revenue growth of 6%, in line with the first half of the prior year. Revenue growth was good in Europe and moderate in the U. S. Japan and China grew strongly and Brazil remained weak. Most other markets continued to grow strongly. We launched 21 new events and completed 2 small acquisitions in the first half. Going forward, we expect the underlying revenue growth trends to continue in line with the prior year. And we expect cycling out effects to decrease the reported revenue growth rate for the full year by around 5 percentage points. Our strategic direction is unchanged. It's still to be a company that delivers improved outcomes to professional and business customers across industries with our number one priority being the organic development of increasingly sophisticated information based analytics and decision tools that drive higher value for our customers. I'll now hand over to Nick Luff, our CFO, who will talk you through our results in more detail. I'll be back afterwards for a quick wrap up and our usual Q and A. Thank you, Eric, and good morning, everyone. Let me start by reiterating and expanding on the financial highlights that Eric showed you earlier. Underlying revenue growth was 4%. Underlying operating profit growth was 5%, resulting in an improvement in the adjusted operating margin to 31%. Constant currency growth in adjusted EPS was 8%. Cash conversion was slightly ahead of the prior period at 90%. Leverage at 2.4x EBITDA adjusted for pensions and leases was in line with the position a year before but was a little higher than the 2016 year end, reflecting the bias of share buybacks and dividend payments to the first half. The interim dividends were up 14% for PLC and up 8% for NV. In the first half, we deployed £500,000,000 on share buybacks, leaving £200,000,000 to be completed in the second half. Here's the income statement in sterling. Reported revenue was GBP 3,700,000,000 with underlying revenue growth of 4%. The impact of small portfolio effects and exhibition cycling out resulted in constant currency revenue growth of 3%. With the dollar and the euro both stronger against the pound, sterling reported revenue was up 14% in total. Adjusted operating profit was £1,150,000,000 up 5% on an underlying basis. Portfolio changes brought that down to constant currency profit growth of 4%. The sterling figure was then boosted by currency, resulting in 15% growth overall. Margins were up 20 basis points, up 31.0%. The net interest charge was £87,000,000 slightly ahead of the prior year, reflecting higher net borrowings and currency effects, partially offset by lower average interest rates. The effective interest rate on gross borrowings was 3.4%, 0.4% lower than for the full year 2016, as historical bonds were refinanced at lower rates. The effective tax rate was in line with the 2016 full year rate at 22.7%. That left us with adjusted net profit of £823,000,000 up 5% at constant currency and up 17% overall. Reported net profit was up 24% to CHF691,000,000 The average share count was down by a little over 2% due to the share buyback program, converting the 5% constant currency net profit growth into 8% constant currency earnings per share growth. The relative weakness of the pound meant that adjusted earnings per share in sterling was up 19% to 40.5p. In euros, it was up 8% to €0.47 Reported earnings per share were up 26% in sterling and 15% in euros. Dividends per share are the same for both PLC and NV. They are, of course, paid in different currencies with the exchange rate set just before the relevant results are announced. We are increasing the rights NV euro interim dividend by 8%, in line with the growth in euro EPS, equalizing to ROIC's PLC sterling interim dividend growth of 14%. The difference in growth rates reflects the year on year weakness in sterling against the euro since the 2016 interim dividends were set in July last year. For the full year, our dividend policy remains unchanged. We will continue to grow the dividend broadly in line with earnings per share, subject to exchange rate considerations, while maintaining cover of at least 2 times in the longer term. Turning to the business areas. As Eric described, you can see how all four areas contributed to underlying revenue growth with Risk and Business Analytics again being particularly strong. Portfolio changes were a slight drag for STM, Risk and Business Analytics and for Legal. Acquisitions were a slight positive for Exhibitions, but that was more than offset by cycling and timing effects, which took 5% off revenue growth. With the pound weaker against both the dollar and the euro, all the business areas saw the sterling reported revenues boosted by between 10% 13%. All four business areas generated underlying profit growth, with the highest growth coming from Legal, up 9% and from Risk and Business Analytics, up 8%. Exhibitions underlying profit growth of 1% reflects the impact of cycling. Portfolio changes were a drag on profit growth, notably for Legal. However, for the sterling figures, year on year currency movements were a significant boost for all four areas. STM's margin was unchanged with underlying improvement offset by portfolio and currency effects. Risk and Business Analytics margins were up 30 basis points helped by portfolio changes. Legal improved margins by 40 basis points as underlying cost reductions and a small currency benefit were partially offset by portfolio effects. Exhibitions margins were down 10 basis points, reflecting event cycling. As we've previously highlighted, we are most significantly a U. S. Dollar revenue earning business with substantial revenues also being generated in euros. We do hedge certain of our future cash flows to smooth the year on year variation in revenues and profits, primarily in STM subscription revenues, giving more stable euro and sterling reported results. Compared to the prior period, sterling was weaker against most major currencies, including by 13% against the dollar and by 10% against the euro. This converted to an 11% benefit to reported growth of revenue, profit and earnings per share in sterling terms. Right now, sterling is actually a little stronger than it averaged against the dollar for the second half of last year and a little weaker against the euro. If exchange rates were to stay at the current levels, those effects were broadly net out, leaving sterling EPS roughly in line with constant currency EPS for the second half. The full year differential between sterling and constant currency EPS will then be roughly half the differential we've seen in H1. Full year euro EPS growth will be a little behind constant currency growth. Turning to cash flow, pick out some highlights. CapEx at 5% of sales was stable compared to the first half of last year as well as depreciation. Cash flow conversion of 90% was up slightly. Cash interest was £80,000,000 the increase in the prior year reflecting currency effects and the timing of coupon payments. Cash tax paid was lower compared to the prior period due to the timing of payments. Overall, free cash flow rose 23 percent to £722,000,000 And here's how we use the free cash flow that we generated. You see cash spent on acquisitions was £15,000,000 in the first half. On the dividend, the final dividend typically accounts for around 70% of the full year total and this is paid in May. Growth in dividend per share and the impact of currency translation offset slightly by shares bought back saw the spend on dividends increase by 13%. As in previous years, we have biased the share buyback to the first half, spending €500,000,000 of the €700,000,000 planned for the year. Most of our debt continues to be denominated in dollars and euros reflecting our cash flows. With sterling more stable since the start of the year, the impact of currency translation on net debt was broadly neutral. That left net debt of £5,000,000,000 as of 30th June with leverage at 2x. Net pension obligations decreased to £522,000,000 reflecting strong asset returns. Taking that into account, when you adjust for pensions and leases, leverage was 2.4x, unchanged from a year earlier. And with that, I will hand you back to Eric. Okay. So just to summarize what we have covered this morning. During the first half of twenty seventeen, our positive financial performance continued and we made further strategic and operational progress. As we enter the second half of twenty seventeen, key business trends are unchanged and we're confident that by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit and earnings growth in 2017. Okay. With that, I think we're ready to go to questions. Okay. So why don't we start up front here? Hi. It's Nick Dempsey from Barclays. Two questions, please. So first of all, just on the difference in legal between the underlying profit growth and the reported profit growth. I know you've got Martindale Hubbell going away there, but 9 points is quite a lot, €12,000,000 if I do the maths right. Did you sell something else in there? Or was that all Martindale? And if it is, how much is there left of that? How big was it in the first place? Because that feels like quite a large number. Second question, you talked about some success in telematics inside the insurance part of risk and business analytics. Can you give us a bit more detail on how that works? Do the insurers share their own telematics data with you and then you aggregate it and build it into your data? Or how else are you getting telematics data? And then how much of a factor is that in driving uplift when you renew deals with insurance? Okay. Well, I'll answer the second, but I'll let Nick cover the first one first. So Nick, you're absolutely right. The difference between constant currency and underlying for legal is all about the disposals and a few acquisitions as well, of course. It is Martindale is the most significant item within that, but it's about half of it. So there are a few other things in there as well. As you rightly say, the Martindale effect will continue into the second half. And I mean, it will next year, it'll be gone. But of course, you will see the year over year effect in next year's numbers. So you'll see it impact this year, second half, probably not quite as big as first half and then you'll impact next year and then it's gone away. Okay. On the telematics question, I think it's important to understand first that in terms of current financial significance, it is not material to the company or even to the total revenue with the insurance segment and the growth rate of the insurance segment. So in terms of mathematics and the total revenue stream, it's not material. It has no impact on our actual half year or full year revenue growth rates. But strategically, there are 2 ways that we're engaging that are significant strategic contributors to the future understanding of risk profiles. One way is we do engage directly with insurance companies through our telematics services and we often build in telematics features into when they want to sign up a customer or a driver and they give them choices. And if you're monitored and tracked and using that risk score, you can actually get a discount. That's one way directly. The other one is another way that is very similar to how we've done everything else in insurance data across carriers and across geographies now, which is that we look at all different sources of telematics data, whether that is installed in the car when you buy it, whether that's boxes, whether that's small dongles that you insert people's behavior, we are able to take in standardized, normalized, turn into something that's usable in algorithms across different segments, across different insurers, across different cars. And that's the general data normalization on the exchange business that we're in for all the other parts of data sets that we operate with. And over time, we expect that we'll be able to contribute to that one significantly as well. Even though, again, I repeat that today, in today's revenue growth rate in revenues, this is not a material part of our revenue stream. Thank you. Good morning, everyone. I'm Sami at Exane. I have three questions please. First, you reported that within the insurance market, the U. S. Has seen a less favorable environment than last year. Would it be possible to elaborate on what you refer to? Is it the crude database that's seeing less requests going through? Are these other part of the U. S. Insurance products that are seeing less favorable environment? Was 2016 particularly strong? Is 2017 exceptionally weak relative? And perhaps give more color on that. And the second question relates to the first one, but in the context of the less favorable U. S. Insurance market, you still have reported the same organic revenue growth at 8%. So shall we infer from that that the international assets within risk has seen growth accelerating? You mentioned Spain as a new country, won some contracts in Brazil. So can you comment on the international side of the old risk solutions business and where the growth there is picking up? And lastly, would you share with us the proportion of the share of trade shows that you own versus the share of trade shows that you organize on behalf of trade bodies and other associations and whether that share of own show has remained stable in recent years or whether there is a big change going on there? Thank you. Okay. Let me take those in order. The insurance market environment, yes, what we have what we try to refer to there because some people have asked us a little bit what's going on in your environment, what does it feel like. And I know that a couple of you have said that you've heard comments from other people about some of our markets, and we haven't historically tried to make any judgment on or comment on the different markets and risks. So we figured we'd try this time. The insurance environment that we're talking about in the U. S. This time is really not a specific growth rate in the market. But it's our set of indicators that we have about how favorable is the environment to our type of services other than the fact that we are continuing to introduce and roll out our own higher value add solutions and roll them out and that drives growth. That's the fundamental major growth driver. The higher value add, the additional data sets, additional tools that we introduce and roll out across the industry. In addition, we look at a few indicators in the market environment that indicate consumer shopping behavior, consumer switching behavior and how that seems to relate to price differentials and other things in the insurance markets. And if you look at those in total, the first half of twenty sixteen was a particularly favorable environment. In the second half of twenty sixteen, it came back into what we consider to average closer to an average historical environment. In the first half this year, you compare to what it was the first half last year was particularly strong. And therefore, on top of that, yes, it continues to be good and we're doing well. We have strong growth in insurance and you see the whole division is growing 8% overall, but it's just not quite as favorable in the U. S. Insurance environment and all those different types of indicators to us as it was a year ago. But we're still very pleased that we're doing very well. The second question, let me just make sure you said international growth. You talked about the whole risk division or the old risk is what you're referring to, the old risk and how those portions are doing now internationally. We're very pleased with how that is going. We're continuing to grow international. We continue to establish ourselves in more and more locations. We have the international sales of global products, in particular in business services. And then we have some of the local operations that are being set up in a few countries. Some of those local operations don't really have much revenue yet, but they're establishing a presence and building data sets. They have basically continued in the first half at the same rate as before, broadly speaking. There's no material acceleration in that revenue growth across the whole business that has a material impact on our overall growth rate. So we continue to do well both in the U. S. And with our international efforts, but it's not like there was a big switch in growth rates, no. The last question was in exhibitions. You asked very specifically what percent of our exhibition revenue is owned by associations we operate on their behalf through contract, it's really contract management, approximately 5% -ish, right? About 5% of it is owned by associations, fully owned by them. Then there's maybe a few more percentage points that we organize in collaboration with different types of associations or organizations, but we own the show, right? So I think the part you're referring to, the ones that are owned by an organization or association and we have some kind of contracts that are multiyear to operate and we run it, but they have a a year to operate and we run it, but they have a they get a piece of economics and they ultimately own the long term rights and that's about 5 percent, right? And has it changed over time? It has not changed over time materially because we tend to do more aggressive launching and spin off and so on that would drive organic revenue growth in the assets that we own. I would expect that if you did a long term trend and you really analyzed it through cycles and so on, that it would slightly reduce over time, but very slowly and very small. And in other words, over 90% of your revenue or well over 90% of your revenues are from shows that RELX owns? Well, yeah, I mean, owns is probably approximately 95%. I mean, but there are a few percentage points in addition to those that then are done in collaboration, so to speak, where it's a partnership, but we own it as opposed to the other way around in the first 5%. It's Patrick Wellington at Morgan Stanley. Three questions. Just coming back to your new indicator of the U. S. Risk market. It doesn't seem particularly reliable, does it? Because of the first half twenty 16, you grew 8% and it was particularly favorable. Second half of twenty sixteen, I think you grew at 10% for the overall risk business because it was 9% for the year and that was a pretty average environment. And then you've got a worse environment, you're growing at 8% again. So, we discount this as an indicator relative to your organic growth is my first question. The second question is, in your statement, you talk about your CapEx and where you're particularly spending it and you highlight legal and STM, but surprisingly perhaps you don't highlight risk. So are you seeing a lesser requirement to invest in risk in terms of CapEx? And then thirdly, just to talk about the STM market, I know you're not going to talk about individual customers and German consortia and so on, but I know you lie awake at night worrying about stuff. And do you worry that there's a sort of moral repugnance going around the market and the industry and academics about the publishing process and the role of the major publishers within it and that this will over time begin to bear down on the major publishers in general? Or do you think you can change the tone of the debate, if you like? Okay. I'm going to ask Nick to cover the second one when we get there on CapEx and legal, SGM and risk. Let me first address the first one on risk growth. Yes, the embarking environment that I referred to here as slightly less favorable or not quite as favorable as first half last year was just specifically the U. S. Insurance market environment. As we also said, our business services environment continues to be very positive. Any indicators we have of that is slightly more diverse in several different end user customer segments. And that was probably slightly stronger or maybe even in the let's call it the same as it was a year ago. So what I was referring to before with a slightly not quite as favorable as last year, that was the U. S. Insurance segment, right? But again, we've said this before, the number one driver of growth in the risk business is our ability to continue to introduce broader data sets, more sophisticated analytics, higher value add decision tools and then install them, demonstrate their value, scale them up and roll them out across the industry. And that takes a few years to do. So the main driver is the value add that we do and that's what drives increased usage, increased value and so on. And the market environment that's why in the past, we haven't commented much on the market environment because we can think we control our revenue growth in this market to a large extent through our value add. But if you look at U. S. Insurance market environment, it was particularly strong a year ago in the first half. But we also have the other 60%, 65% of the markets continue to be strong just like a year ago, right? Let me make sure then. Nick? Yes. So the CapEx question, Patrick. I mean, obviously, as you know, the new Lexus platform rollout in legal is our single biggest project we have going on, which is why we highlighted that. In STM, we tend to have bigger individual projects because they're operating off that one big science direct platform. But that's not to say we aren't spending in risk and business analytics as well. It tends to be lots of smaller projects there. They add up to pretty similar percentage of sales to STN. It's a slightly smaller business. But it is true that because of just the number of initiatives and they tend to be fast rollout type products, that what exactly you capitalize and they tend to be smaller and so you don't capitalize quite as much perhaps in terms of the nature of the projects. But overall, so the same way. On the last question of STM, well, as you know, I never comment on any one individual customer or contract negotiation in one country. I mean, I can tell you this that what we have mentioned before is that the total number of contract completions so far year to date, just a few days ago, was at the same level as it was over the last 3 years. And the growth rates built into those contract was the same as it's been over the last 3 years. So in total, in aggregate, for the more than 1,000 renewals that we do every year around the world, we're basically in the same position in total as we have been. The question you asked about tone and moral and so on is interesting because every year among those well over 1,000 contracts us and of science to engage directly with each one of these customers and fully understand exactly what their issues and concerns and concerns are and make sure we try to address all of them in a way that supports the research institutions involved and the individual researchers involved. That's always our approach. And sometimes, therefore, things become a little more visible or sometimes a little less visible. But the way we see it is, is more on the tone that we see ourselves as a service provider. We are here to offer services to anybody who wants to publish scientific materials in this specific sub segment. And we are very happy to provide service, a full range of services. And I think that's becoming more and more apparent to our customer industries and to the research institutions over time. If you want to just post your own document, if you have a scientific discovery, a research paper and you just want to post it and you don't want to have anything to do with the publisher, you just want to post it to make it available, we help institutions with those services. We help make it visible. We index them and make them visible. That's their choice. That's not something we publish or charge for. We just include it in all our sort of the kind of documents you can find. 2nd choice you have if you're an individual researcher, you can then decide that you want to submit it and publish it and you don't want to pay anybody anything, you just want to make it available, published and you actually want to submit it, then have it reviewed, published, edited and produced in a way integrated in all the different databases and guaranteed and protected and so on forever and you don't want to pay for it, you want users to pay if they want to use it, then we provide that service. If you then say, no, what I actually want to do is, quality stamp on, edit it and do, want a publisher to do the work and put their Qualys stamp on, edit it and do all the production selection, integration and so on, but I'm willing to pay to have it these services and we probably have in total about 17% or so of the total number of articles published in the world. We're probably the world's largest subscription based publisher. We're probably the world's 2nd largest author paid publisher right now, the last time I saw the data. And if you look at sort of manuscript indicators that we might be the largest again. So we provide all these services and it's sort of up to the individual researchers under the principle of freedom to publish or to display to pick any one of those methods. And we're a large supplier of all types of services. And I think that's becoming more understood over time that we're not in the debate about which one you should choose, we're just providing the services. Let's go over here now. Morning. It's Catherine Tait from Goldman Sachs. One question just following up on the points you made on different models of publishing research submissions. Can you talk about how the profitability would vary for you across those different models and whether or not you are sort of really agnostic from that standpoint? And then secondly, on legal, understand you're investing a lot in these new products and that's been helping to boost the growth there. Can you talk or can you perhaps strip out what the growth was in the new products as opposed to the growth in your more traditional business there as well? Thank you. Okay. Well, on the STM publishing model question, there actually we are truly agnostic. There is no difference in us in principle between model or the other. There are hundreds of different price points for all of our different services and they depend on the quality, the quality control, the rejection rates, the processes and all those different things. And that's the case on subscriber pays or author pays and so on. So there is a market pricing for each one. We have a policy of basically pricing at or below market and to have price trends over time that are also actually below market over time so that we offer something that's priced at or below market with pricing trends that are at or below market and to do that with a quality of a service that we think should be better than average quality service on leading technology platform and with better than average quality content. And if we do that, we believe that we can be a leader in each little sub segment over time because if you offer higher quality at above average quality at below average prices, you should attract more over time. And we believe that we can do that in the long run. And because we have a machine that is by far the lowest cost and most sophisticated technology based in the industry, we should be able to do that with attractive economics for shareholders over time, right? That's our approach to it. And we're very happy if anybody, any one researcher wants to pick one model over the other. The second question, legal new products. Well, it's actually very interesting because if you take a true new product separately and priced separately, sold separately to customers, does that have a material impact on our overall growth rate in legal? No, not at this point. It's a little bit like some of the smaller new initiatives we talked about in risk before. However, the new feature sets that could look like products that are integrated in our core platform and integrated in the multi year subscription negotiations for our users, are they adding material value to that platform so that they help our customers want to use our product and therefore want to sign up for it for the future? Yes. And is that material? Yes. Can I quantify it? No. It's Ritchie Malo from Bank of America. On exhibitions, is there any I mean, you've given us the color by geography. Is there anything you can tell us about particular industry verticals that are doing well or coming under pressure? And then on risk, you talked about the portfolio change helping the margin. Just if you could clarify what change that was? And just to clarify that at this stage, you're not seeing operational gearing on that very strong top line growth, it's all going back into investment. Thanks. Yes, I'm going to let Nick cover number 2 here in a second. On Exhibitions, yes, as you know, we typically just give an overview by geography. And you were saying you got the geography, but you're interested in what's are there segment differences, sector differences underneath? Yes. I mean clearly, there are always some geographical swings and as well as individual show swings in any one short especially if you take a 6 month period, there's a little bit of sort of event volatility. But because we have well over 500 events in 30 countries, any one show usually has a very small impact on the overall. But there are nevertheless some sector trends that you can see. I mean, as you know, over the last few years, we've talked about sector trends being a bit slow in natural resources and raw materials and so on over the last few years. That's basically stabilized at this point. And as you can see, our emerging markets, if anything, have probably stabilized and come back up a little bit, right? In the U. S, it was not like the U. S. Economy was doing poorly in any way or all our shows. I would say the slower growth, if anything, has probably come in sectors relating to retail fashion jewelry have probably been the ones that have slowed down a little bit in their growth rates. If you wanted the sector indication and most others similar, similar to what they've been in the past, not similar to those 3. So that's just a bit of an indication. And the margin question, Rishi. Yes, you're absolutely right. The portfolio effects were positive for risk design. Obviously, they're making a 37% margin. So anything we sell that makes the margin less than that is a help. And we've been still selling things like the trade magazines and things that you've seen that we've done over the last 18 months or so. And in terms of your operational gearing question, as you know, we are our objective and our primary objective in risk is to drive the organic growth and to drive it for a very long time. That does mean putting resources behind the new growth initiatives. So we are willing to allow them to have the cost growth come right up towards revenue growth, and we're not seeking to drive dramatic improvements in margin. We're seeking to make sure we drive the organic growth in the long term. So Continue from the front here. Thanks. It's Chris Collett from Deutsche. Two questions. One was just on legal and going back to the topic of new products. See from Lex Machina has been rolling out a whole series of new legal analytics. Just wondering do they fall into that category of the standalone products which are not material or are they being rolled into the Lexus package, into the base? And second as part of the question on legal was just your acquisition of Revel. Just wondering what you were planning to do with that. Is that going to be standalone or is that going to be some features that you're looking to again to roll out across the platform? And the second question was on STM. I think one of the features of the market is perhaps customers accessing STM content via of other means, things like ResearchGate and then sometimes through obviously through the legal file sharing sites. Just wondering, is there a point do you envisage a point where that sort of access to journal content grows via other methods grows to such a point where you could see cancellations of some journals perhaps particularly some of the smaller ones. Okay. On the legal side, legal analytics from Lex Machina. Lex Machina by itself is a very small revenue stream when we acquired it, right? And it's a small product set. But it's again falls in the same category as what we talked about before. The feature functionality set, what they can do is extremely powerful. And when we acquire them and put that on top of our historical database, our current database of all different cases and all our other data sets we have inside our company, they become a lot more powerful than when they're standalone. So what we're doing with Lex Machina today is, again, not having a material impact on our additional incremental revenue stream at the moment. But we believe over time, there will be some separate products that will be priced separately and sold separately that will be using a fair amount of that technology. But most of it is going to be integrated onto our core platform and do higher value add legal analytics across our user base and across our content sets. The same thing is for our new one, Ravel Law, which is again a small legal analytics oriented company that we're going to integrate into our operations, integrate into our The last one on STM. Yes The last one on STM. Yes, as you know, I'm not going to comment specifically on any one site or any one company, but piracy and illegal file sharing services have been a feature of all intellectual property industries for a long time and will continue to be a factor in the future as well. As you know, in all our different divisions, we have intellectual property relating to content sets, to taxonomies, to data sets, to algorithms, analytics and to software tools, right? And we have intellectual property rights in all of those. Also in general, we have fairly generous sharing and fairly flexible rules around what people can do with it. However, that does not stop illegal file sharing sites or illegal piracy sites to start to expand and go beyond the traditional sort of normal sort of local or personal use. When that happens, for us, just like in any other intellectual property industry, there are relatively standard procedures for how to deal with that. First of all, we go through often through industry associations or other intellectual property organizations and contact the specific site or specific organization and talk them through in a friendly way what they can or can't do. Sometimes those things get resolved very quickly. Sometimes they lead to very long discussions about future potential constructive In certain situations, you have to go beyond that and there might be other type of legal processes in the end. But typically, this is fairly well understood, and we're not the only industry that deals with it. So in the long run, I believe that it will always continue to be a factor, but we will continue to resolve them just like other intellectual property industries have. Morning. It's Tom Singlehurst from Citigroup. So I had a couple of questions both on risk. Actually going back to the question on telematics. I was just interested because I mean to the extent that insurance companies are trying to get a proprietary edge on the behavior of individuals to better price risk. I'm interested in why they would be willing to hand over telematics data to you to effectively sell on to other people and sell back to themselves? And then also in that same context with things like the GDPR, I know that's a European thing, but to what extent are or will insurance companies be prevented from handing data over to you because of consumer protection requirements? The second question, coming back a little bit to Patrick's question on your comment about the outlook for insurance. So it feels a bit odd that you're bringing this up as an issue. Are you trying to warm us up for a slowdown in aggregate revenue growth for 2018? Should we expect the 8% slowdown to 7% for next year? Okay. Let me talk about both of those. On telematics, why handover parts of the data? Well, most of the data is not generated directly at an insurance company, of course. It's generated at the point of driving and it can be generated in lots of different ways. But over time, even if you said that in the end, the insurance companies build their own data sets, that's perfectly fine. I mean, as you know, we've operated in this insurance market for 25 years. Insurance companies generate an enormous amount of internal data. That's what they do for companies generate an enormous amount of internal data. That's what they do for their customers and that's how they drive their economics, that's how they drive their strategies, their target marketing, their retention. They all have very different policies on how to actually serve their customers. They have a strategy. All we know is that over and over and over again with all different data sets and all different algorithms that if they continue to do it by themselves, they have one economic model. If they then test run using only their economic model versus using our additional data sets and the ones that can be available from our data sets, from our databases, from our algorithm, you put them on top, they make more money. They improve their economics. They improve their strategies. They improve their targeting. And if they do that, they will want to see that value add from us. So this to me, the telematics data set is not that different from any other data set, whether that is about background behavior or criminal behavior or crashes or claims history or any other things that we can associate to profile the risk of a person or the risk of an asset or type of asset by location. So we see it as very similar. Let me make sure I see it. Yes, you said a question of the insurance market commentary. No, we are not trying to introduce anything. It's just that we have heard a couple of comments from you or other people over the last few months that they have heard comments about what's going on in some of these risk markets in the U. S. And it's the only division where we never made a market commentary in our write up because it was so much driven by what we do. So we said we'll put in a comment in the 2 largest segment of what does the market environment like? It was not a forward looking retrospective looking. All the things that we can find here, all the things we measure, they're not forward looking indicators. It's a way for us to disaggregate what we saw in the prior quarter and we do it retrospectively. And then we look at it and try to segment where did what did we see and how did people behave. It's not a forecasting tool. We don't have it at that level at this point. The last question, let's see. Was that it? That was it. Yes. Thank you. Thank you. Hi, it's Gisanna Salati from Macquarie. Just to close on this risk growth kind of development. 2nd half comes with 200 basis points higher comps. So we should not see that as a headwind. We kind of find expecting the same underlying 8%, 9% revenue growth at organic level there. Secondly, one for Nick. Maybe I'm reading too much into that, but in the press release, the wording around the buyback nearly seems to suggest that there is so little left for the last 5 months of the year that you might consider increasing the £700,000,000 to a higher level. Bear in mind, I had a 2 plus percent impact on EPS growth in H1. You're going to be left with less than 1% in H2, which might be undesirable. And last, in terms of legal leading indicator for the whole division, I think last year we had seen an improvement at first and then a little bit of a comeback. The latest Thomson Reuters leading indicator seems to be quite positive. Can you share with us your view on the market from that standpoint? Yes, I'm going to let Nick cover number 2 after I've covered Baldi 1 and 3 first. First of all, on risk growth, I'm not sure I fully understand. Did you say to me that there was a 200 basis point differential? Is that what you said? Yes. Organic revenue growth was 8% in H1 last year and 10% in the second half. Well, that's interesting mathematics. As you know, we round to full percentage points. And for the full year round for the half year rounded to 8%, for the second half for the full year rounded up to 9%. So you can, of course, we're not going to get into starting to use decimal points for time periods for subdivisions in this company. We're predictable enough. But as you can guess that the difference can be small or it can be large between rounding to 8 or rounding to 9 or being 8 or 9 for the half year and the full year. We don't quite see it the way you saw it, let's put it that way. That was the gap. But we did have, as we articulated last year in the Q3, we had particularly strong for a period of time there, particularly strong activity for a period of time. We have no indication right now on any of our businesses of what their revenue sort of transactional volumes are going what they're going to be going forward. We don't we don't volumes are going what they're going to be going forward. We don't within these sort of small variations in a very strong growth market, we don't try to make any sort of month by month detailed market forecasts. So all we can tell, sort of month by month detailed market forecasts. So all we can tell you is that so far this year in the first half, our growth rate was basically the same as a year ago. And if you net out all the different market factors in the first half this year versus first half last year, it was very similar, right? It was slightly, slightly less favorable in one portion and very favorable and continue to be favorable in the other portions in the majority. Going into the second half, we don't see anything different. That does not mean that there couldn't be things that are different, but we have not attempted to try to do market forecasts there. The legal market, your third question, from us is a little bit similar. We track what is going on and what we have seen in the legal market. We do not make any legal market forecast ourselves because there's so many other companies that do that, right? There are lots of companies that do that and have market forecast consulting firms, stand alone firms, etcetera, etcetera. If you look at those indicators over the last 5 years, let's say, you have seen quarterly, I would say, volatility almost that is within a certain band. Whenever we've seen a little bit of dip, it tends to come back within 1 or 2 quarters. When you've seen a little bit of a bounce up, it tends to come back down over the last 1 or 2 quarters. And we have not so far, up until now, seen anything that indicates that that sort of bouncing around in a certain range has been anything different from that history, meaning that it seems to bounce around within a certain range. But again, we don't do any of our own forecasts, so I can't predict what will happen. Nick, do you want to currently buyback? Yes. Just on the buyback, we're actually in exactly the same position we were a year ago. We did 500 in the first half last year, 200 in the second half. We've done 500. We have 200 to go in the second half. So it's no different. The average share count in the second half, of course, against the second half of last year will benefit from the shares we bought back in the first half. So the 2% differential in share count will apply in the second half pretty much exactly the same as it did in the first half. And we will update you on our 2018 buyback plans in February. Okay. There's one over here. Good morning, Steve. Just one question on print books, back to historic trends. So my recollection was, well, the industry had a tough time last year and I think you agreed that there might be some element of destocking there going on. Can you just give us some more color in terms of how you're seeing things going there? And I guess any feel for future? Yes. I mean as most of you are well aware, over the last few years, we've continued to see a gradual print book decline, partly due to shifts over to electronic solution sets and also decline. So and we've said that that decline has been and and it varies a bit because it's transactional business, but it's sort of been in the high ish single digits most of the time on average. And in the first half, in most years, it's been fairly consistent in those directions, right? A little bit of volatility on timing of orders and so on. But basically, it's continued in a certain trend. In the second half of last year, it got worse. And I know many of the players who are very large in print books that have more detailed and deep relationship with all the different distribution chains, they articulated that they saw a destocking effort in the second half of last year. And what we saw seemed consistent with that, but I can't tell you that that's what actually happened. But what we saw was consistent with that storytelling in the second half of last year. And the fact that this year, it seems to be back more to, so far to a typical first half environment. That's all we know so far. Again, it's a little bit like what you just asked me for about the other industry segments. What will happen in the second half, again, we don't really have any type of print book predictive model or industry survey that we do to predict the second half. So we are just assuming as it's about 10% of Elsevier, 10% of 1 of our divisions in print books now. We look at it and say we are assuming that it's going to continue in line with historical patterns until something else pops up, until we see a change. And at this point, we have no indicator that is anything different from the normal historical patterns this year so far. I know it's tiny for you, but just interesting, obviously, to extrapolate for us. But just are you noticing any difference in returns? So has that destocking implied this year returns for you or do you think it was just a channel sort of just taking stock out of it and it doesn't really matter? Again, the first half is smaller than the second half for us, which means that it's very hard to draw a conclusion from it. But if you said, to me, it looks like maybe returns in the first half, the actual physical returns have been marginally lighter, right? But if you would assume that in a shrinking market, they would continue to come down. And again, that pattern would be consistent with the comment on a larger than usual destocking in the second half last year. But again, in the context of the full year and our full year revenues, the total revenues, even total print book revenues, that's actually not the material factor. The material factor will be both shipments and returns in the second half. That's the more important question. And that's a forward looking thing. That's harder for me to predict. But the first half, I would say, the world looks pretty similar to previous first half. Okay. Well, thank you very much. Thank you for taking the time to come and look forward to seeing you again soon.