Earnings Call: H1 2016

Jul 28, 2016

Good morning, ladies and gentlemen, and thank you all for coming to our 2016 interim results presentation. And what I know for all of you is a very busy morning. And for those of you on our webcast, thank you for listening in. I hope you agree with me that this is another good set of results as the group has continued to execute well and consistently on its strategic priorities. This has resulted in a pleasing, if slight improvement in our underlying overall revenue growth to 4% with underlying adjusted operating profit growth at 6%. Constant currency EPS is up 8%, reflecting a 6% increase in the euro EPS for NV and a 13% increase in the sterling EPS for PLC. Once again, all the major businesses have contributed to this strong performance and the development of the business overall, both organically and by acquisition, is very much on track. You will have already seen that we've decided to increase the dividend per share by 6% in euros for NV and by 39% in sterling for PLC. This decision is based on underlying trading and the formulaic result of the rapid movements in the sterling exchange rate, including those at the very end of the period and on the change in the U. K. Tax law with respect to dividend credits. As Nick will explain to you, this midyear complexity does not signify any change in our full year dividend policy. So, thank you very much. Eric and Nick will now take you through the results in detail. Eric? Well, thank you, Andy. Good morning, everybody. Thank you for coming and 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 2016 with underlying revenue and profit growth across all four business areas. We made further strategic and operational progress with a slight increase in our revenue growth rate reflecting the continued improvement in our business profile and the organic development of increasingly sophisticated analytics and decision tools. Our overall financial performance trajectory strengthened slightly when compared to the prior year with underlying revenue growth of 4%, underlying operating profit growth of 6% and earnings per share growth at constant currencies of 8%. All four business areas again delivered underlying revenue growth as well as underlying operating profit growth. As you can see on the left, our underlying revenue growth rates range from 2% to 8%. And as you can see on the right, our underlying operating profit growth rates range from just below mid single digits to double digits. So let's look at the results for each business area. Our STM business grew 2% with key business trends remaining positive. Primary Research, which represents just over half of the division's revenues, saw continued strong growth in usage and in article submissions, and we continue to make good progress on journal quality. We saw continued good growth in databases and tools and in electronic reference across segments. Print book declines were in line with recent years, and print pharma promotion revenues were stable. Underlying profit growth was again slightly ahead of underlying revenue growth, but the margin expansion before currency effects was offset by exchange rate movements. 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 revenue growth improved slightly to 8% with strong growth across all key segments. Insurance, which represents just over onethree of the division's revenues, continued to achieve strong growth, driven by good take up in adjacent verticals. Business Services, which represents about 1 quarter of the division's revenues, saw strong growth in Identity and Fraud Solutions. The Government and Healthcare segments continued to develop strongly. Major Data Services maintained strong growth and remaining other brands and services were stable. Underlying operating profit growth broadly matched underlying revenue growth. Going forward, the fundamental growth drivers remain strong, and we expect underlying revenue growth trends to continue and to be broadly matched by operating profit growth. Legal revenue growth improved slightly to 2%, with key trends essentially unchanged. Continued growth in online revenues was again largely offset by further print declines. U. S. And European markets remained stable but subdued, while revenue from other markets continued to grow well. Rollout, adoption and usage of new platform releases and applications continue to progress well, both in the U. S. And in international markets. Underlying profit growth was strong. The margin improvement of 30 basis points reflects organic process improvements and the ongoing decommissioning of systems, partly offset by an adverse impact of around 100 basis points from portfolio changes or 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 the first half, in line with the growth rate in the first half of twenty fifteen. In the U. S, growth was in line with prior year, and growth in Europe was marginally ahead prior year. Japan continued to grow strongly. China achieved good growth overall and Brazil remained weak. Most other markets continued to grow strongly but slightly below prior year. We launched 14 new events and completed 3 small acquisitions. Underlying profit growth was 7% with a slight margin improvement largely due to exchange rate movements. Going forward, we expect underlying revenue growth trends to continue to be in line with the prior year. For the full year, we expect cycling in effects to increase the reported revenue growth rate by around 3 percentage points. Our strategic direction is unchanged. It's still to evolve into a company that delivers improved outcomes to professional customers or professional and business customers across industries and to get there primarily through organic development. Now as you can see at the bottom of this page, we continue to believe that by systematically evolving our business, we're driving an improvement in our business profile and in the structural quality of our earnings. And as you know from previous discussions, by that, we mean more predictable revenues, a higher growth profile and improving returns. And let me cover each one of those 3. 1st, more predictable revenues. This slide compares our current first half twenty sixteen business profile to 2,007, just prior to the last major economic downturn. As you can see, advertising, the green section, was 15% of our revenues in 2,007. This is now below 2%. In addition, within the orange, marketing services and pre employment screening represented 4% in 2,007, and they're now completely gone. Within the rest of the transactional revenues, the rest of the orange, print books have gone from 13% in 2,007 to 6% in the first half of twenty sixteen. But seasonal adjusted, it's probably more like 7 percent on a full year basis. Exhibitions have gone from 14% to 17%. Adjusting for the cycling effects in the time period, it's really gone from 15% to 16% on a like for like basis, so not that big a change. But most importantly, transactional revenues in our risk division have gone from 4% to 17% of our total revenues and now represent the largest portion of the orange section. These revenue streams, as you know, are often part of multiyear agreements even though they're subject primarily to transactional pricing. So taken together, we believe that these business profile changes are leading to more predictable revenues for the business as a whole. 2nd, a higher growth profile. We've always said that underlying revenue growth our underlying revenue growth rate in any 1, 6 or 12 month period will primarily be a reflection of the global macroeconomic environment at that time and its impact on our customer markets in the geographies in which we operate. However, we continue to believe that the evolution of our business profile is positioning us for structurally higher growth capacity on average throughout economic or market cycles. With print now down to 12% of our revenues, our print to electronic migration is largely complete. And while the print drag is still a factor, it is becoming less significant. Now with our face to face revenues continuing to grow, our number one priority is now to continue to transition from electronic reference to electronic decision tools to drive higher customer value and as a consequence, of course, higher revenue growth. Now we do this primarily through the organic development of increasingly sophisticated information based analytics and decision tools, which, as you know, was the main focus of our investor seminar last November. And third, improving returns. With a strong balance sheet and an inherently cash generative business, the strategic priority order for using our cash is unchanged. We believe that we're generating improving returns by maintaining our primary focus on the organic transformation of our business, only supported by selective acquisitions when they are natural additions to our existing organic growth strategies and to our migration towards higher value decision tools. I will now hand over to Nick Luff, our CFO, who will talk you through our first half results in more detail, and I will be back afterwards for a quick wrap up and our usual Q and A. Morning, everyone. Eric gave you the financial highlights for the first half, which were 4% underlying revenue growth, 6% underlying operating profit growth and 8% growth in constant currency adjusted earnings per share. Cash conversion was slightly ahead of the prior period at 89%. Leverage adjusted for pensions and leases was 2.4 times, a little lower than at this time last year, but up from the year end, reflecting the bias of share buybacks and dividend payments to the first half. As the Chairman said, the interim dividends are up 39% for the PLC and 6% for the NV. I'll come back to explain that differential later. We deployed just over £500,000,000 on the share buyback, leaving us around £200,000,000 to deploy in the second half, the same amount as in the second half of each of the 2 previous years. Here's the income statement in sterling. Starting at the top, you can see that reported revenue was just over £3,250,000,000 The 4% underlying revenue growth was added to by a small positive portfolio effect and cycling benefits to give 5% growth at constant currencies. With the dollar and the euro both averaging around 6% stronger against the pound, sterling reported revenue was up 10% in total. Adjusted operating profit came in at just over 1,000,000,000 Lower profits from businesses we are selling or have already sold meant that constant currency profit growth was 5%, a little behind the underlying growth. The sterling figure was then boosted by currency, resulting in 10% growth overall. Margins were up slightly to 30.8%. The interest charge rose to £83,000,000 due to higher average borrowings and currency movements. The effective tax rate was very similar to last year at just over 23%. That left us with adjusted net profit of just over £700,000,000 up 6% at constant currency and up 11% overall. The average share count was down around 2% due to the share buyback. As a result of constant currencies, the 6% net profit growth converted to 8% growth in adjusted earnings per share. The relative weakness of the pound meant that adjusted earnings per share in sterling was up 13% to 34p. In euros, it was up 6% to 0.435. Following the elimination of tax credits on UK dividends, reported earnings per share is now the same for both PLC and NV, albeit expressed in different currencies, which impacts the relative growth rates. That elimination of UK tax credits on dividends means that dividends per share are also now the same for both RELX PLC and RELX NV. You will recall how that impacted last year's final dividend, and you can see here how it's impacting this year's interim dividends. The dividends are paid in different currencies, of course, with the exchange rate set just before the relevant results are announced. So with the euro some 18% stronger against the pound compared with this time last year and a 10% differential due to the removal of the tax credit adjustment, there is a substantial difference in the growth rates of the 2 dividends. We are increasing the RELX NV Euro interim dividend by 6%, in line with the growth in euro earnings per share, and equalizing the RELX PLC sterling interim dividend to that, giving growth of 39%. As the Chairman said, for the full year, our dividend policy remains unchanged. We will continue to grow the dividend broadly in line with adjusted 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 4 contributed to underlying revenue growth, with Risk and Business Analytics being particularly strong. M and A was a slight drag for Risk and Business Analytics, but helped both Legal and Exhibitions. Cycling and timing added 3 percentage points to Exhibitions revenue growth. With the pound weaker against both the dollar and the euro, all business areas saw their sterling reported revenues boosted by between 4% and 6%. All four business areas generated underlying profit growth ahead of revenue growth, with the highest growth coming from legal, up 12% and from risk and business analytics, up 9%. Exhibitions profit growth of 7% benefited from cycling and timing effects. As I mentioned earlier, disposals were a drag on profit growth, particularly for Risk and Business Analytics and for Legal. However, for the sterling figures, currency movements were a significant boost for all four areas. Margins were maintained or improved for all four businesses. STM's margin was unchanged with an underlying improvement offset by currency effects. Risk and Business Analytics margins were up 10 basis points, while Legal was able to drive a 30 basis point improvement as we continue to achieve underlying cost reductions offset by portfolio effects. Exhibitions also showed a 10 basis point improvement. As you know, we are most significantly a U. S. Dollar revenue business, with substantial revenues also being generated in euros and other currencies. 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. As I've mentioned, sterling was on average 6% weaker against major currencies in the first half. That converted to a 5% benefit to reported growth of revenue, profit and earnings per share in sterling terms. The pound has, of course, weakened further from the first half average rate. And if it were to stay at current levels for the remainder of the year, then it would average between 10% 11% weaker against both the dollar and the euro for the year as a whole. If those rates were to apply, we would expect an 8% to 9% benefit to sterling reported growth rates for the full year. Turning to cash flow. CapEx was stable as a percentage of sales at 5%, while depreciation increased slightly. With the lower working capital movement compared to the prior year, cash flow conversion was 89%, up from 85% in H1 2015. Cash interest was in line with the prior year, but was well below the reported interest figure as we have 2 term debt issues, which pay interest annually in the second half. Cash tax paid was higher in the first half due to the phasing of payments. Overall free cash flow rose 16% to £587,000,000 And here's how we use that free cash flow. There were limited completions on of M and A deals in the first half with cash spend of only £33,000,000 although taking into account deals nearing completion since the half year, we are pretty close to our recent annualized run rate for acquisition spend. We have biased the share buyback to the first half, spending just over £500,000,000 of the £700,000,000 planned for the year, With most of our debt denominated in euros or dollars reflecting our cash flows, the weaker pound increased the sterling value of the debt, hence the £331,000,000 currency impact you see in the reconciliation. That left net debt at £4,600,000,000 as of 30th June, with leverage at 1.9 times calculated in U. S. Dollars as we always do. Lower bond yields in the UK and currency translation in relation to the U. S. Scheme pushed up the pension deficit to £600,000,000,000 Taking that into account, when you adjust for pensions and leases, leverage was 2.4 times. And with that, I'll hand you back to Eric. Well, thank you, Nick. So just to summarize what we have covered this morning. During the first half, our positive financial performance continued and we made further strategic and operational progress. Going forward, as we enter the second half of twenty sixteen, key trends across our business 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 2016. With that, I think we're ready to go to questions. Okay. So why don't we start over here from this side. I'm Sami from Exane. Two questions, please. 1st, can you comment on the international initiatives within the risk and BI division? What products are you taking abroad? What markets are you targeting? I think we've heard of India for the first time or I heard of India for the first time today. Can you elaborate on that and how big it is and how big it could get? And secondly, within the Exhibitions, you're guiding organic revenue growth to be in line with last year's 5%. We had 6% in H1. Do we have to read a slowdown into the second half of the year in the exhibition organic revenue growth profile? Okay. I think I'll handle both of those. Risk International, yes, as I mean, we've talked about this now for a while that we're starting to map and the opportunities outside the U. S. For the traditional risk side of the business, right? Of course, the side that came from the old business information that's mixed in there always started with a very international profile in many different places, including the acuity business that looks a lot like risk but came from the old side. So when we talk about our new international initiatives, we really focus on the ones that used to be solely U. S.-based historically. And what we have talked about, and probably the first we launched internationally was the U. K. Business or U. K. And Ireland, which we launched a few years ago, which has now added a fair amount of products and services organically and also added a few small acquisitions. And it's going very well. It's going very well. The second one I think we've talked about in that is the Chinese business in the insurance space, the auto insurance space that we set up a while ago. And we announced where we own a large part of a local data analytics provider that's here to help the Chinese insurance industry with deregulation and sort of risk assessment and profiling over time. Early stages and small, but it's going very well. Then we also have, of course, our global risk related due diligence, risk profiling businesses that we're doing across countries, but they're not local efforts and that's continued to grow well. But we also have small local efforts. We have set up a small start up business to help in Brazil to help set up for risk profiling beyond traditional credit risk. So we're building a data set there and a platform to help in Brazil. And we have set up a platform for insurance in India. That's also very, very early. And it's not really an up and running commercially scalable business at this point, but we have that platform in India today. So this if you take these together, it's not material in the sense of the overall division at this point. But it's becoming something that we think is a real relevant business that's going well and is growing well into double digits. And therefore, we think that you look at this in several years down the road, you'll be very happy that we started to do this when we started a few years ago. That's the risk international profile and Care to comment how big is international within the risk division? Well, I think we said of these data streams, I think we said I think it's now 1.5 years ago or so that I'd say it's order of magnitude $50,000,000 right, at that time. And since then, it's continued to grow with double digits for a couple of years, and we added a couple of small add ons. So we haven't disclosed the number. But it's bigger than it was 2 years ago, but probably not quite double at this point, but we're probably getting there soon. Exhibitions, you said, yes, I think you spotted it correctly that this year, growth rate in Exhibitions, if you take it globally for us, it is following a pattern that's very similar to a year ago, right? Very, very similar. And we the way global growth, global economic growth is positioned today, it seems very similar to a year ago. And what we saw last year is that the geographies that are slightly heavier weighted in the first half have slightly higher growth than the geographies that have the exhibitions that are more heavily weighted in the second half. So I don't know exactly what will happen in the second half. But because we haven't seen any differences anywhere, it's just a weighting that's slightly different, we assume the base case is that if the first half grew like first half last year, we would assume that overall, things might change. But at this point, we don't see any changes from the overall picture from last year. Thank you, Eric. So let's move on here. Let's keep moving down one way. Yes. Hi. It's Nick Dempsey from Barclays. Two questions, please. So first of all, if you separated the 71% of your business that's electronic into decision tools and electronic reference. Can you give us a rough idea of what that split would be? And also the kind of difference in terms of growth and margin of those 2 different types of revenue stream? And second question, I understand that you're pretty focused on avoiding large acquisitions, and you make a good point on the attractive returns that you achieved. But if you hadn't bought ChoicePoint and Sisent back in the day, I guess you'd be growing about 2.5% not 4%, given that that's a chunk of most of your risk business. So will there come a time when you need another sizable deal to kind of push your growth up into the next leg? Okay. Well, let me start with a question around decision tools versus more reference. Well, unfortunately, this is not like a print to electronic migration, where there's a physical product you're selling product you're subscribed to differently and priced separately, the way we when you shift formats. It's not that way. As we highlighted in our December or November investor seminar, this is a gradual migration towards more sophisticated decision tools. You're adding gradually adding broader data sets. You're adding more sophisticated analytics. You're leveraging more powerful technology. You push it from a lookup information lookup to a lookup with analytics to lookup supporting a decision to actually making a decision. And that's a very gradual evolution. And we have not come up with any defined cutoffs to say it's this or it is that. And we tried to illustrate in that seminar how we tried to put them in some buckets. So therefore and because the products don't necessarily have a product cost or product borrowing, it's a platform cost, right? It's very hard to try to break them out. So we're not even trying to do that internally. We haven't even attempted that. The way I would describe it is that we've clearly gone very far down this path in our Risk and Business Analytics division, where the majority of our revenues are what we would think of as sort of decision tools, decision support tools. We're in the early stages of migrating that direction in legal and in science. Some of our products, you would argue, are like that. Or some of the decisions they're used for are use cases like that is probably another way to describe it. But we're in the very early stages in Legal and Science. And in Exhibitions, we're just piloting them in a few exhibitions here and there. So I would put it as very far down in 1 division, early stages in 2 and piloting in the 4th. That's the best I can do. In terms of organic versus acquisition, well, the one thing I would disagree with you on is that if we had not done these acquisitions, we would have been like this. That assumes that there's no organic transformation of your core business. If you look at some of the businesses where we have not made acquisitions and we've done a successful organic transformation, there are several of those inside the Risk and Business Analytics division. They have exactly safe organic growth as the business that we bought 10 years ago and have continued to transform and are growing today. So they successfully transformed old RBI businesses inside Risk and Financially Analytics, when you manage to transform them organically, they have the same growth rates as the ones that we bought 10 years and had continued to evolve. If you buy something and you don't continue to evolve it, it's going to slow down. If you own something forever and you don't evolve it, it's going to slow down. But if you keep evolving it and driving it in this direction, you can get higher organic growth. Of course, the growth rate in any one segment at any one point in time depends on the market you're serving and the customer markets and how fast they're growing and the economic environment they're in. Both in the near term, any 6 or 12 month period, it's driven by the market you're selling into and over time, of course. If you're selling into a market that is growing, it's easier. Okay. Next, let's keep going down this side and then we'll move over there. Thanks. Hi. It's Adam Berlin from UBS. To keep up the theme, I've also got two questions. Firstly, can you say a bit more about why there's been a step up in growth rates within RBA and within legal? And secondly, can you think why you've been able to sustain the 2% growth rate in STM where we've seen some of the competitors' numbers start to drop? Okay. Sure. So let me say you said, 1st, why is there an increase in the growth rate in Risk and Business Analytics? Yes, let's take one at a time. If you just look at risk and business analytics, that is the best example of how we have managed to do this gradual business profile evolution. And within that group, you have a combination of the 2 things I mentioned before. The fastest evolving business because it was probably the one who changed at least 10 years ago, the old Read Business Information Magazine Publishing that we're moving very quickly into faster growing decision tools. And in the old risk business, the analytics group in insurance and so on, we also continue to move down that continuum. We're adding significantly broader data sets. We're constantly evolving the analytical models, the mathematical models there. They're becoming better and better all the time. And we're leveraging more powerful technology. We can do things now we couldn't do 3 years ago or 5 years ago. The technology continues to evolve, right, and become significantly faster, less expensive and therefore more valuable. So what we're doing here is when you make a decision tool slightly more valuable to the customer and it's embedded, they can actually see what they do, how they do with our tool compared to without the tool. And they can see how much more money they make, how much better off they are. And when they can see that, it's quantified, it's a real improvement, they want more of it, they use more of it. So it's no surprise to me that over the last few years, number 1, that this is our fastest growing division. And And it's no surprise to me that this is a division where revenue growth has gone from 6% to 7% to 8% over the last 3 years. Because when you add more value to a customer, they see more value, they will use it more, they will want more and our revenue growth goes up. So it's that simple. It's actually a reflection of this transition. When you ask in legal, we often talk about the fact that in the legal industry, the biggest driver in the near term, even in the medium term, is actually a health and the growth rate of the legal services industry because we have such a big business that is subscription based and driven by the traditionals of research subscriptions, right? And therefore, we go with the market fundamentally at the base there. Even in legal, we're trying to move towards more sophisticated analytics, better decision tools, adding new features and functions onto our platform, we're rolling out new applications. And some of that is coming through. But fundamentally, in the legal markets, we really don't see any difference from a year ago or 2 years ago in the overall broader legal market, which is probably the main driver of that in the near term. But there is a little bit of improvement in the product sets and the tools that we've been providing. But it's not as significant as what you've seen in risk, being gone from 6% to 7% to 8% over the last 3 years or over a longer time period in the old Business Information business. In STM, I am not sure I know exactly what you're referring to. I can tell you what's going on in our STM business, which is that the metrics that we see so far this year are very, very similar to metrics we saw a year ago or 2 years ago, which is that we continue to see the strong underlying volume growth in the world of science, the number of researchers growing, the amount of research conducted, the number of submissions to us of articles, the amount of usage of our information tool, those growth trends are very strong and they continue very much in line to a year ago or 2 years ago. Of course, as we say there, there is always a little bit of softness, ongoing softness in print environment. The print declines have continued over the last few years. And sometimes they're a couple of points higher, a couple of points lower. But that, we put down sort of lumpiness in the rate of decline in the print area. There's no fundamental trends that are any different now from a year or 2 ago. So I'm not exactly what you're comparing to or referring to, but we haven't seen any material trend changes very similar to the growth trends we see. Okay, let's go over this way. We can start at the front. Hi, Alik Maas from Liberum. My question is actually how much of the U. K. Academic budget is funded by the EU? And how much of that is dedicated to hard sciences versus soft sciences? I'm actually not sure I have those numbers with me right now. I mean, we can probably get you something that's a good approximation of that later. Colin can help you get to that. I don't have those exact numbers with me right now. But I think it's important to point out in our total geographic profile as a company. Overall, as a company, 8% of our revenues are in the U. K. That was at the old exchange rate last year. But 8% of our global revenues in the U. K, we have customers in 180 countries. And if you look specifically at the STM division, probably close to 40% of our business is in North America. Less than onethree is in all of Europe, right, And the U. K. Is, of course, a small portion of that. And then rest of world is more than onethree, right? So outside U. S. And Europe. So that's the broad picture that we that you see in the for us in that. So any one change in funding is always material to us, always material in how it is we help our customers and help add value to our customers. But as these shifts take place, we try to align and adjust to them, and we also try to help the different communities figure it out. As a matter of fact, we were recently involved, our Elsevier division was recently involved in a panel to decide how do we track the evolution and the potential changes to U. K. Research with the U. K. Research group here. It was probably about 10 days ago. So we are very involved in trying to map how it might change, but I can't tell you the exact numbers right now. Catherine Tate from Goldman Sachs. Just two questions from me. Firstly, on your legal business, you talked about the 30 basis points of margin expansion after adverse portfolio effects. Just wonder if you could touch on that. Are you just phasing out some of the less profitable products? Or is there something else going on in the mix there? And then secondly, this is probably one for Nick, but thank you very much for the very clear sort of currency overview you gave. I wonder if there's anything for us to consider from a cost perspective, whether any of your costs in any of the divisions are more aligned to the UK versus other markets, anything we should consider there? Thank you. Well, I'm actually going to ask Nick to talk about both of those. Yes. So, on the legal portfolio effect, the biggest single item in that is actually the joint venture, the Martindale Hubbell joint venture that we formed a few years ago. So we moved the business into a joint venture where you don't stop counting the revenue, but you count the profits. So that was sort of, if you like, boosted revenues. That was always intended to fade out over time. So that's gradually fading out. So that's the most significant impact on the portfolio. They did buy some businesses last year. In 1st year, you don't tend to have the profits necessary right up there. So, that would have some effect as well. So, those are the big things. And on the currency question, yes, so obviously, the group as a whole, after we've done a bit of hedging, is broadly the sterling revenues and costs are about the same proportion as a whole after hedging, though. So if we before any hedging, they would actually would costs are proportionately higher in the U. K. Than our revenues because we obviously is that you can see it's one of our home countries. So if you look through what's happened with currencies and what's likely to happen if rates stayed roughly where they are, you can see that the sterling effect will be similar to what you've seen in the first half and go a bit further. But for the group as a whole, it didn't actually affect margins very much at all. I mean, It hurt STM, but it helped Exhibitions and it helped Risk and Business Analytics. So, the group as a whole is looking at margins, it's actually reasonably neutral if you're just looking at sterling moving against the other currencies. Okay. Let's keep going over there. Good morning. It's Chris Collett from Deutsche. Just got two questions related to the legal business. One was just on late last year in the acquisition of Lex Machina. I think they're rolling out some new legal analytical products. I think you mentioned earlier that some of those decision tools and analytics aren't a particularly big factor in legal, but should we expect them to become more meaningful? Or is the market just in the near term still being driven? Or rather are your is your growth in the near term really still being driven by the overall market? And second, Bloomberg Law recently said that they were growing deep into double digits, obviously, off a small base, but are you seeing them being more active in the market? If you look at where you specifically mentioned one of our acquisitions last year, ex Tlakena, the organic developments like that and the small plug ins that we put in from the outside, they are helping us move along that continuum that I talked about before, sort of from traditional electronic reference to electronic decision tools. And this is one small additional component of that. But if you look at the current revenue growth or the near term impact, it is not related to Lex Machina or any of the other acquisitions from last year. They don't even count at this point and are small enough that even if they were included, they wouldn't have a material impact in the right at the beginning. Over time so me just answer your question. In the near term, which is what you asked, the market environment, the customer environment will be the main influence on our growth rate in the near term. We, of course, believe, continue to believe that over time, what we are doing to add more value to our solution set will, in the medium to long term, have an impact and drive increased value to the customer, therefore, increased demand and increased growth rates on average throughout an economic cycle. And we're following the model that we've done in other parts of our So we believe we continue to believe that in the medium to long term. But in the near term, it's more around how we're operating, how the markets are doing, how we're operating the market. Let's see. What was the other question you had? Bloomberg, yes, sorry. Bloomberg, we have not seen any change to the market dynamics or the competitive dynamics in the legal business over the last, I would even say, couple of years or even in the last 6 months. So I'm again unaware of the specifics that you're mentioning, but we have not seen any change in the dynamics with our customers or what we see as the competitive environment. And I think we have one more down here. Good morning. It's Patrick Wellington at Morgan Stanley. Seems a remarkable reluctance to celebrate the doubling of the growth rate in your largest single business, which has 25% of group revenues and which has grown at 1% since time began, it seems, but at least 6 years. So why are you so reluctant to celebrate that? Is the market actually improving? If you look at the Thomson Reuters peer monitor, it suggests that maybe there's a little bit of an uptick. Indeed, at this very meeting last year, I think you almost lent towards an underlying improvement in the legal market and then you seem to edge away again. And then going back to Catherine's question, you're also putting on 130 basis points of underlying margin growth in this business, except for the fact that Martindale Hubbell seems to be making less than it did before. But if that Martindale Hubbell effect is over, should we also be looking for your largest single business, which has doubled its growth rate to be pushing up its margins by more than 100 basis points a year, which would be quite a good story and read it if it were true. So, Alex, so what do you think? Well, the way we look at it is that we have signaled for a while that we're working on the sort of the structural growth capacity of this business and the inherent sort of structural quality of the business. And we showed you some of that on the charts today. And we've said for many years that if we do that right, you'll continue to see more predictable revenues, a higher growth profile and improving returns in the business. And we've seen it come through here and there in different parts of the business. And some of those measures come through. And we don't think it should be a big surprise that we're gradually improving a little bit in one area 1 year and a little bit in another area another year if the environment around us is roughly similar to what it was. And this year, it happens to be that we continued the improvement trajectory in risk and business analytics, and we got a little bit of a step up in Legal. I guess I'm still a little bit of the old school and say that you don't really celebrate 2% organic revenue growth even though it is an improvement and, as you say, a doubling. So that's the issue on the Legal side. On the question of market indicators in legal, the PMI, as you mentioned, is one of the indicators of the market, one that everybody watches, one that we watch. If you look at that over the last 1, 3 or 5 years, it always tends to go up a little bit in 1 quarter and then it tends to go down 1 or 2 quarters later. And if you look at where we are today on those measures, the last one I looked at would indicate that we continue that sort of volatility, but pretty much along a sort of flat trend line. So I try not to get excited or upset when it sort of fluctuates up a little bit or down a little bit. And I think that's basically where we are today that I can't judge if there is a trend in the legal market that's starting or not. To me, it looks very similar to 6 months ago or 12 months ago. Now I forget what was the last question. Margins. I'll let Nick cover the margins. So in Legal, of course, we are going through quite a big transition with the new Lexus platform rollout and there's some double overhead costs, double infrastructure costs that go with that. And we're now eliminating some of those costs, which is why we're able to keep bringing the costs down quite quickly. I think you shouldn't read too much into one single half year. In any half year, it's a few $1,000,000 of cost to move from one half to another half, and you can see big variations bigger variations in the margin. I think we stick by the 50 to 70 basis points to what we've indicated as a sort of steady improvement we can achieve in the Legal business looking forward the next few years. And that's a good guide. We've done a bit better than that in the first half of this year, but I wouldn't read too much into just one half numbers. On a different subject, I mean, the NV dividend has gone up despite that sharp movement in sterling. Are we saying that under the equalization process, if you like the MV dividend or if it were the other way around, the sterling dividend would never be allowed to fall assuming the underlying business is growing its earnings. So you will always arrange the dividend so that you don't get an artificial drop, if you like, in one or other of the dividends. We would never be categoric about exactly how and I don't know what exchange rate movements you may be dealing with. But you've seen what we've been able to do in this first half. We are talking interim dividends, which are only between 25% 30% of the total. So, we have a bit of room for maneuver in terms of what the interim is relative to the final. So, we've been able to accommodate what was quite a significant exchange rate movement. We've been able to accommodate that and still increase the euro dividend in line with earnings per share. As you said, that does mechanically then drive the PLC dividend to what is quite high growth. But we've been able to manage that within the overall dynamics of the numbers. Okay. Well, I think that brings us to the end of our question and answer session. So thank you again very much for coming and look forward to seeing you again soon.