Earnings Call Transcript
RELX PLC (RELX)
Earnings Call Transcript - RELX Q4 2023
Erik Engstrom, CEO
Good morning, everybody. Thank you for taking the time to join us today. As you may have seen from our press release this morning, we delivered strong financial results in 2023, and we made further operational and strategic progress. Underlying revenue growth was 8%. Underlying adjusted operating profit growth was 13%. Adjusted earnings per share growth was 11% at constant currency, and we are proposing an 8% increase in the pound sterling full year dividend. All four business areas performed well in 2023. And on this chart, you can also see the relative sizes of the business segments within each business area. In Risk, strong fundamentals continue to drive underlying revenue growth of 8% with underlying adjusted operating profit growth of 9%. In Business Services, which represents around 45% of divisional revenue, growth continued to be driven by financial crime compliance and digital fraud and identity solutions, and we saw a strengthening in new sales in the second half. In Insurance, which represents just under 40% of divisional revenue, strong growth was driven by further expansion of solution sets across markets supported by positive market factors. Specialized industry data services, which represents just over 10% of divisional revenue, saw strong growth led by the Commodity Intelligence and Aviation segment. Going forward, we expect continued strong underlying revenue growth with underlying adjusted operating profit growth slightly exceeding underlying revenue growth. In STM, further development of analytics continues to drive the ongoing shift in business mix towards higher growth segments. Underlying revenue growth was 4% and underlying adjusted operating profit growth was also 4% with a slight increase in adjusted operating margin. In databases, tools and electronic reference and corporate primary research, which together represent around 45% of divisional revenue, strong growth was driven by further development of higher value-add analytics and decision tools. Primary Research, Academic and Government segments, which also represent around 45% of divisional revenue, continued to be driven by strong growth in article submissions with pay-to-publish open access articles growing particularly strong. Going forward, we expect continued good underlying revenue growth, with underlying adjusted operating profit growth slightly exceeding online revenue growth. In Legal, we saw a further improvement in underlying revenue growth to 6%, up from 5% last year, driven by the continued shift in business mix towards higher-growth legal analytics. Underlying adjusted operating profit growth was ahead of revenue growth at 8%. We continue to see strong growth in Law Firm and Corporate Markets, which account for over 60% of divisional revenue. Lexis+, our integrated analytics offering, has continued to see strong uptick and usage growth across customer segments. Lexis+ AI, our new platform, leveraging generative AI functionality, was launched commercially in October. The initial customer reaction has been very positive and the rollout has started well. Going forward, we expect continued strong underlying revenue growth with underlying adjusted operating profit growth exceeding underlying revenue growth. Exhibitions delivered strong revenue growth and an improvement in profitability. Underlying revenue growth was 30%, driven by a significant increase in face-to-face activity with average like-for-like event revenue across the portfolio ahead of pre-pandemic levels for the full year. The improvement in profitability reflects both the higher activity levels and the structurally lower cost base with the adjusted operating margin also above pre-pandemic levels for the full year. Going forward, we expect strong underlying revenue growth with a further improvement in adjusted operating margin. Our strategic direction is unchanged. We leverage deep customer understanding to combine leading content and data sets with powerful technologies in global platforms to build increasingly sophisticated information-based analytics and decision tools that deliver enhanced value to professional and business customers across market segments. We have been able to develop and deploy these tools across the company by embracing artificial intelligence technologies for well over a decade. We are confident that our ability to leverage AI and other technologies as they evolve will continue to be an important driver of customer value and growth in our business for many years to come. Our growth objectives are: for Risk, to sustain strong long-term growth in the current range; for both STM and Legal, to continue on the improving growth trajectory; and for Exhibitions, to continue on the improved long-term growth profile. When combined with our strategy of driving continuous process innovation to manage cost growth below revenue growth, we resulted in continued strong earnings growth with improving returns. I will now hand over to Nick Luff, our CFO, who will talk you through our results in more detail. I will be back afterwards for a quick wrap-up and our usual Q&A.
Nicholas Luff, CFO
Thank you, Erik. Good morning, everyone. Let me start by providing more detail on the group financials. As Erik said, underlying revenue growth was 8% with underlying adjusted operating profit growth well ahead of that at 13%. As a result, the adjusted operating margin improved to 33.1%. Improved operating results flowed through to adjusted earnings per share, which increased 11% at constant currency despite higher interest rates. Returns continue to improve with ROIC up 1.5 percentage points to 14%. Cash conversion was strong at 98%, contributing to a slight reduction in leverage to 2.0x at the lower end of our typical range. Given our overall performance, we have been able to increase the proposed full year dividend by 8% to 58.8p per share. Acquisition spend in the year is relatively modest at GBP 130 million, and we deployed GBP 800 million on share buybacks. Looking at revenue, you can see the continued strong growth in Risk, while STM maintained its improved growth rate and Legal with a pickup in its growth. These strong growth, together with the sustained recovery of Exhibitions, took underlying revenue growth for the group as a whole to 8%. Electronic revenue, representing 83% of the total, grew GBP 0.07 underlying with the strong growth in face-to-face activity, more than offsetting the print decline, given the overall rate of 8%. It was a 1 percentage point drag on overall growth from the effects of biannual events cycling out in Exhibitions while currency movements were broadly neutral to the group level, resulting in reported revenue growth in sterling of 7%. Risk and Legal delivered strong underlying growth in adjusted operating profit, both slightly ahead of revenue growth while STM underlying profit growth was in line with revenue growth. Exhibitions profit saw very strong growth, reflecting the increase in activity levels against a structurally lower cost base. Overall, group adjusted operating profit was up 13% underlying, up 12% in total at constant currency and up 13% in sterling to over GBP 3 billion. Margins were up slightly in Risk and STM and up a little more in Legal as we continue to focus on keeping cost growth below revenue growth across the group. Exhibitions margins are now above the levels achieved pre-pandemic. Combined, these movements saw group margins increase to 33.1%, an improvement of 1.7 percentage points. Here's the group adjusted income statement showing the underlying growth of 8% in revenue and 13% in operating profit. The interest expense increased with the effect of interest and gross debt up to 4.6%, reflecting higher rates for dollars and for euros. The interest expense includes a charge of GBP 26 million for the early redemption of a high coupon bond. Without that, the effective interest rate would have been 4.2%. The tax charge was GBP 553 million with an effective tax rate of 20.4%. The tax rate benefited from nonrecurring tax credits, which resulted in an effective rate below our normal ongoing rate. Net profit was close to GBP 2.2 billion, up 9% at constant currency and up 10% in sterling. All that gave us adjusted earnings per share of 114p, up 11% at constant currency and up 12% in sterling. Here, you can see how the high earnings flow to cash flow with EBITDA now over GBP 3.5 billion. CapEx was GBP 477 million, equating to 5% of revenue, leaving us with adjusted cash flow conversion of 98%, similar to typical levels pre-pandemic. Cash interest paid was GBP 294 million, the increase reflecting higher interest rates. Cash tax paid of GBP 619 million was higher than the income statement charge, which benefited from nonrecurring tax credits, which were noncash. Total free cash flow was just under GBP 2 billion. Here's how we deployed that free cash flow. We completed 6 small acquisitions during the year for a total consideration of GBP 130 million, the largest of which was Human API, a health care data platform that joins the life insurance segment within Risk. Total dividend payments in the year were close to GBP 1.1 billion, and we deployed GBP 800 million on the share buyback. Overall, with an acquisition, dividends, and share buybacks broadly utilized the full GBP 2 billion of free cash flow. Year-end net debt decreased slightly as a result of currency translation effects. Our priorities for use of cash are unchanged, although it remains our number one priority, and we continue to invest in the business with CapEx consistently around 5% of revenues. We augment that cash with a level of capital expenditures, with the level of spend typically being the most significant variable in our uses of cash, depending on the opportunities that arise. Average acquisition spend over both the last 5 and 10 years has been around GBP 400 million, with 2023 being a below-average year. We pay out around half of our adjusted earnings in dividends and have been able to increase the dividend every year for well over a decade. Leverage has typically been in the 2.0x to 2.5x range, with strong cash generation, improving EBITDA and modest acquisition spend in the year meaning leverage was at the lower end range at the end of 2023 at 2.0x net debt to EBITDA. We continue to return our surplus capital through the share buyback with GBP 1 billion of spend announced today for 2024, of which GBP 150 million has already been deployed. Alongside our financial performance, we continue to make progress on our corporate responsibility objectives. Anchored by the purpose of the company, we focus primarily on our unique contributions using our products and skills to benefit society in ways only we can. We also performed well on those metrics where we can be compared to others. This is a selection of our key corporate responsibility data showing that 2023 was another year of solid progress. And our commitment to corporate responsibility continues to be recognized by external reporting agencies. We were rated AAA with MSCI for an eighth consecutive year and ranked second in our sector globally with Sustainalytics in the top 1% of companies overall.
Erik Engstrom, CEO
Thank you, Nick. Just to summarize what we have covered this morning. In 2023, we delivered strong financial results, and we made further operational and strategic progress. The improving long-term growth trajectory is being driven by the ongoing shift in our business mix towards higher growth analytics and decision tools. Going forward, we continue to see positive momentum across the group, and we expect another year of strong underlying growth in revenue and adjusted operating profit as well as strong growth in adjusted earnings per share on a constant currency basis. And with that, I think we're ready to go to questions.
Operator, Operator
We will now begin the question-and-answer session. The first question comes from George Webb with Morgan Stanley.
George Webb, Analyst
Thank you, I want to start with two areas, please. Firstly, on the Lexis+ AI side, in terms of how customers are reacting around commercial launch, noting that this is a platform upgrade, are you expecting customers to wait until the end of their renewal cycles if they want to make the upgrade? Or are you seeing customers come in to you ahead of renewal? And then also around that initial engagement, can you give any feel for the levels of initial commercial uptick you've been seeing as you've gone through that rollout? And secondly, when you think about the M&A environment into 2024, you pointed out, Nick, that over the last few years and particularly in 2023, it's been about smaller deals, that spend has been at a lower end. Do you expect that to change this year based on what you're seeing in terms of your potential acquisition pipeline as well as the valuation levels out there?
Erik Engstrom, CEO
Okay. I'll let Nick answer the second, but let me take the first here that I think when it comes to something as important as the deployment of generative AI, I think we're likely to see a combination of both. Traditionally, platform upgrades have come into play at the renewal cycle, most of the time, which is typically 3-year renewals, which is why deployment or penetration of new platforms comes through gradually. But in this case, I think we're going to see a combination of both. I think we'll see some of that wait for renewal, and I think we will see many who also step up as a new sale, as an upgrade whenever they see it available. We will see, of course, over time how that pattern develops. You asked about early signs because we are doing very well in the marketplace; we get very significant positive feedback from our customers. We track a significant number of internal metrics on that. But because it's a competitive market, and we have other players also participating, we have not been disclosing and don't plan to disclose detailed tracking of what those metrics look like. But it's a very, very positive early launch that I think our customers are very happy with, and that we are very happy with.
Nicholas Luff, CFO
George, on your question about M&A. And obviously, as you know, our focus is on organic development primarily as a business, and there are lots of opportunities to continue to grow, continue to adopt new technologies within the business without acquisition. But we do look for where there are things that can enhance and accelerate the organic development. We will look at acquisitions. That typically means they are in what you might call bolt-on size. And obviously, what happens year-to-year very much varies with the opportunities within that. But there's nothing different in the pipeline and range of opportunities that we see today than normal. Last year happened to work out to be a relatively low year, but that was just the way it fell. No change in approach and nothing particularly different in the pipeline valuations. Not the key, really. Obviously, what matters is the value to us, and that's where we see opportunities that can add value to our business; we'll go after them, but it does vary from year to year.
Operator, Operator
The next question comes from the line of Adam Berlin with UBS.
Adam Berlin, Analyst
Two from me. Firstly, on STM, can you give us some metrics on the Journals business for this year, submissions, articles published growth in the number of pay-to-publish articles? That would be very helpful, just to understand the dynamics there. And the second thing is, can you give us the impact of the biannual events returning in 2024, the pound impact or percentage impact to help us model Exhibitions revenue for 2024?
Erik Engstrom, CEO
I'll ask Nick to respond to the second question. Regarding STM in the Journal business, the main driver is the long-term volume growth in the industry. This growth is primarily fueled by the increasing number of submissions, which significantly impacted our research activity. Last year, we saw a substantial rise in article submissions, and if we look at the average growth rate over the past two years, it has rebounded swiftly. We are now experiencing strong growth rates, averaging in the high single digits historically, and this reflects a typical long-term increase. Even taking a two-year average, the growth is impressive, not just reflecting last year's exceptional performance. In terms of pay-to-publish submissions, that sector is growing even faster. Depending on how we categorize certain submissions, we're seeing growth rates exceeding 30%, with the number of articles published in pay-to-publish increasing in the 20% to 30% range over the past year. This continued growth appears very healthy. Now, Nick, could you discuss Exhibition?
Nicholas Luff, CFO
Yes, Adam, regarding the biannual cycling events, we're returning to our typical historical pattern. Since 2024 is an even year, we can expect a consistent boost to revenues from that. Historically, this has been around 5% to 6%, depending on the cycling trends, which serves as a reliable indicator.
Adam Berlin, Analyst
Great. Can I ask one more question? Do you have any comments on the situation in Germany? I know you typically don't discuss specific deals, but are the universities in Germany engaging with the new project deal, and is there any momentum in that area?
Erik Engstrom, CEO
Well, I mean, as I said, the main driver of growth, volume growth and revenue in the primary research segment of our STM business is volume growth, volume of article submissions and therefore, over time, what we publish on that. As you have seen, if you followed us for a long time, as many of you have, you've noticed that the exact method with which they pay, whether pay-to-read or pay-to-publish or if they put together or separately, how they buy doesn't seem to have had much impact on the growth trajectory historically. And I expect that to continue, that the main driver is going to continue to be volume growth and that how they pay and how they buy together or separate, again, it's not likely to have a very big impact on the growth trajectory going forward either.
Operator, Operator
The next question comes from the line of Carl Murdock-Smith with Berenberg.
Carl Murdock-Smith, Analyst
Two from me. Firstly, just in terms of your comments, you said that you expect both STM and Legal to continue on the improving growth trajectory. I just wanted to kind of ask what you mean by trajectory there. So do you expect further acceleration from the 6% in Legal and 4% in STM? Or do you mean for it to simply continue at that higher growth rates relative to historic? And then secondly, along the same theme, I was wondering if you could just comment on pricing discussions with customers, particularly if inflation comes down or whether you're finding your pricing discussions kind of not really impacted by inflation as your growth has been in the past?
Erik Engstrom, CEO
Yes. So I'll again cover the first, and I'll ask Nick to cover the second on pricing. Well, as we say in our press releases, as you've seen, the improving growth trajectory over the last few years and in this year continues to be driven by the ongoing shift in our business mix towards higher growth analytics and decision tools. That's our strategy, and it continues to be our strategy. And therefore, the growth objective, for both STM and Legal, the growth objectives are to continue on this improving trajectory. That means to continue to drive the business mix shift towards higher growth analytics and decision tools. However, to develop, to deploy, and then to sell these tools have a certain cycle and those divisions are 75% to 80% subscription-based, often with sort of 3-year contracts that roll through. So therefore, I think you have to continue to assume that the improvement in growth rate is going to come through gradually over the next several years that this is not a one-year flip and it isn't what we have had, and it's probably not what you're going to see going forward. But when I say the growth objective is to continue on the improving growth trajectory, that's what I mean.
Nicholas Luff, CFO
Regarding the question about inflation, our pricing has not been significantly affected by inflation, whether it is high or low. Our focus remains on the value we deliver to customers. The growth we are experiencing is largely due to the introduction of new tools, features, data sets, and analytics. As we gain greater adoption across various customers and as each customer utilizes more of these tools, we expect to see an increase in spending from them. This should not be viewed as an increase in price. In fact, if you examine unit pricing metrics, they generally trend downward as we provide additional value. Therefore, the inflation rate in the broader economy does not have a significant impact on our pricing.
Operator, Operator
The next question comes from the line of Nick Dempsey with Barclays.
Nick Dempsey, Analyst
I have three questions. So first of all, Thomson Reuters last week was talking about price contributing about 3.5 points to their revenue growth, that was on a group basis. Obviously, quite a lot of that is legal. Nick just talked about price not being a very relevant part of what you do. So is there a true difference between how Thomson Reuters and you are thinking about pricing legal? Was there perhaps a definitional difference here between whether we're talking about customers spending more or a true price increase? That's the first question. Second one, can you give us an indication of the underlying market trends that you are currently seeing in both insurance and business services within Risk? So are you seeing some tough comps now in insurance after last year's good start to the year? Just an understanding of that picture now. And the last question, you've already answered a couple of questions on Lexis+ AI. I was just wondering if you can give us a bit more of an indication of this interest. So are we talking about hundreds of law firms? And within firms, are they taking that product, that platform on a widespread basis across the firm, so you'd see a noticeable difference in their spend? Or are we talking about a few units or geographies trialing it?
Nicholas Luff, CFO
Nick, you need to inquire with other companies about how they define and describe pricing. For us, the key point is that it revolves around each customer engaging with more modules, more analytics, and a greater portion of our content sets. This should result in an overall increase in spending by each individual customer, but we wouldn’t classify that as a price increase; they are receiving more value for their additional expenditure. That’s how we see it.
Erik Engstrom, CEO
So if you go on to risk, I would say, basically, as expected, we saw last year towards the end of last year, continued improvement, both in new sales and in activity levels in Business Services. So Business Services growth rate within Risk has gradually been coming up over the last few months and it continues that way in the beginning of this year. And as you said, they are actually now in a slightly less strong growth period in early 2023. So we expect that to continue. And then, on the other hand, Insurance that had that ramp-up towards the end of 2022 and grew very strongly during all of 2023, they are now starting to lap at a time when they grew a little more strongly than they have in the past. So we would expect that the overall growth rate on top of that now maybe then moderates down towards historical averages relatively soon. And that's exactly what has happened over the last month or two. And as a whole, that division, therefore, continues to grow, almost exactly in line with what we had expected and what it has done at this time of year, most years when they had a good year. So it's on track for what we expected. And as you said, slightly moderating in one and slightly accelerating in the other. The last part, you asked about Lexis+ AI. And yes, we are seeing very strong interest, very strong uptake. We had many thousands of law firms signing up for the initial sort of commercial insider program. We had certain advantages and certain previews and tests and others. And since it's gone commercial, we have seen many firms signing up fully with large and wide deployment and significant step-up in usage, and we've seen some others that have done small and initial tests, but it's a full range and it's very active out there; very active, it's very positive. And the feedback we are getting is very good, and we've gotten some very specific reports on how much they estimate they save in time and effort that are, of course, very feature-specific and function-specific and very private, but, to each firm. But it is very positive, and we have basically a full range of the alternatives that you mentioned. It is not one that's dominating.
Operator, Operator
The next question comes from the line of Tom Singlehurst with Citi.
Tom Singlehurst, Analyst
Yes. Tom here from Citi. Three if it's okay, two on AI and one on Semantics, I think is probably the right word. But on AI, Lexis+ AI you've talked about. You've also launched Scopus AI within STM, and in one of the webinars you hosted explicitly said that it was an add-on charge for product. I'm just wondering whether you expect that to have a distinct positive impact on STM growth in 2024 or whether it will just take time to sort of work through in the same way that you described the impact at Lexis. The second question on AI is around investment. Publicists have said they're investing EUR 100 million a year, WPP GBP 250 million a year, Thomson Reuters more than $100 million a year. Can you quantify the investment that you are making or have made and whether there's any incremental spend on AI beyond the existing R&D budgets? Second question. And then thirdly, I just really wanted to go back to that point you just made, Erik, on sort of historical trends because all the way through last year, there were constant references to historical trends, either you grow above them or in line with them. I suppose I'm just trying to get a sense of whether you are signaling that we've had a period of above-trend growth and we're going to be slowing down or whether the new level, the new base that you set in 2023 is the new normal. Those are the three questions.
Erik Engstrom, CEO
I will address the first and third questions, and I’ll start with the first one. Regarding AI, we have various initiatives in STM. The announced ones include Scopus AI, which was introduced last summer and launched commercially recently, and also CinicalKey AI, announced a couple of months ago. The Legal division has a main core platform that serves over 60% of our customers and continues to evolve internationally with added features and functionalities. Lexis+ AI operates as an integrated platform, with new capabilities being launched within it. In contrast, while STM uses a similar foundational infrastructure behind the scenes, it consists of multiple distinct products that are marketed separately, each with its own AI tools. Consequently, these products will be released at different times, meaning each will have a limited individual impact on the division's commercial progress. However, collectively, they should have a significant positive impact over time. Focusing on Scopus AI, it is a sophisticated, high-end embedded research platform tool, but it does not encompass a large portion of the STM division. Thus, its commercial impact will be gradual and may take time to influence revenue growth for the division. Customer feedback has been very positive, and there has been considerable interest, with a high number of customers engaging with us through various introductory calls and presentations recently. However, the commercial impact will be slow to materialize.
Nicholas Luff, CFO
Tom, your second question on investment, etc., and AI. Look, we are always, of course, spending on and investing in adopting new technologies, either AI or anything else, building new data sets, building new products. And generative AI is obviously a significant opportunity, particularly for Legal, but also for STM as we've been discussing. But what we're putting into it and behind it is really where are we directing our resource, where are we directing our spend, and it's not really changing the overall amount that we're spending and putting behind the growth opportunities. And of course, the other thing generative AI gives is internal opportunities to make ourselves more efficient, our internal processes, and we're obviously working on that as well. So when you put all that together, we are obviously bringing a lot of focus and effort into the generative AI opportunities, but that doesn't change our overall approach of ensuring that cost growth gains below revenue growth in all of our businesses as we go forward.
Erik Engstrom, CEO
In response to the third question, it's true that we have moved away from referencing historical trends in our comparisons. We had relied on these references for some years, but we discontinued them as our company has consistently shown an improving growth trajectory in both revenue and profit over several years. This shift has made the notion of historical trends less clear for some observers. Consequently, we have chosen to clearly outline our growth objectives both overall and by division. Our guidance for each year is now presented with precision to clearly indicate the expected range of growth. To clarify, we do not anticipate the long-term growth trajectory to stop or decline. Our goal is to maintain this positive trend, driven by the changes in our business mix that we've mentioned. For the Risk division, we aim to sustain strong growth in the current range for STM; for Legal, growth will be gradual, primarily through subscriptions over time; and for Exhibitions, the focus is on operating in a higher value, higher growth, and higher margin environment that has emerged post-pandemic.
Operator, Operator
The next question comes from the line of Steve Liechti with Numis.
Steve Liechti, Analyst
Yes, good morning, everybody. I've got two, please. First of all, on the STM for database and tools, I know you put it together in your commentary with corporate primary research. But can you give us a harder figure for STM database and tools as a percentage of that division? Maybe this year and last year. I've got 40% in my head, but I just wanted to confirm that. That's the first question. And then on Exhibitions, you kind of mentioned it there actually in your last comments on sort of faster long-term growth rate. And given the business as it is structured now today, what do you think would be a good like-for-like growth rate going forward from here? Again, in my head, I've got 5% to 6% organic growth historically was kind of the right number for you in the old days.
Nicholas Luff, CFO
So the first question on what proportion is database and tools, it's just under 40%. And then if you put in corporate primary research as well, you got towards 45%.
Erik Engstrom, CEO
And on Exhibitions, I've said this before that in the near term on Exhibitions, we are 100% focused on sort of capturing the growth opportunity that exists there, which has here was the reopening as well as other opportunities. But now and going forward for the next few years, that we're really 100% focused on the growth opportunity and the value uplift we see from the introduction of new data-driven digital tools and the commercialization of that. But it's very clear to us now that Exhibitions is on track to become a higher value add, higher growth, and higher margin business going forward than it was before COVID. I mean, it's going to be a higher value add based on the fact that we are introducing a range of digital tools, and we have increased the rate of innovation, the pace of innovation in that business now. It's going to be higher growth based on the improving ability that we have developed to commercialize this higher value add, and it's going to be higher margin based on the structurally lower cost base that we now have in the business. So that's the direction that we are going. Exactly how big that value uplift will be, exactly how much higher the growth rate will be, I guess we will see over the next few years. But it's going to be all of those three. I think that's pretty clear to us. But I would assume the next few years, it's going to be higher than it was before COVID or the numbers you mentioned.
Steve Liechti, Analyst
Great. Can I follow up on Nick's response regarding the just under 40% in database and tools? Was that for the current year? Could you provide a comparable figure for 2022? I would expect that business to be growing faster, leading to an increase in that proportion.
Nicholas Luff, CFO
It doesn't change that much year-to-year. I mean as you say, it is growing faster. But as a proportion, it doesn't make that much difference in a single year.
Operator, Operator
The next question comes from Konrad Zomer with ABN AMRO ODDO.
Konrad Zomer, Analyst
I've got two. The first one is on your net working capital requirements. One of the beauties of your business model is that because of the subscription-based part of your revenues, net working capital tends to be negative, if you like. Is the structurally higher growth rate of your revenues going to have an impact on your net working capital requirements longer term? And my second question is on Exhibitions. You already explained the reason why you think margins could structurally improve because it's the digital tools, etc. But can you share with us what you think the split might be between higher growth and the scalability and higher margins or just higher margins because of the GBP 100 million of costs you took out during the pandemic?
Nicholas Luff, CFO
Yes. Konrad, the work goes as you said, that we have good working capital processes with payments upfront for many of our products on a subscription basis. So operating with negative working capital. As the business grows, I don't anticipate any significant shift in that. It can clearly in any one year just vary a little bit depending on exactly what happens around year-end in payments and things. But structurally, I don't see anything that's shifting it in any material way going forward.
Erik Engstrom, CEO
And then when it comes to Exhibitions, there are really two sides to this. One is that as you can see for the actual 2023 results that you now have seen, Exhibitions now come back with a structurally lower cost base. So that's the starting point. That's now a historical fact the way we look at it. But then going forward from here, our strategy will be in Exhibitions, as for the rest of the company, to manage cost growth below revenue growth on the cost side. The number one priority is always to drive higher value-add to our customers, to drive higher revenue growth. The second priority is always to manage our cost growth to go below revenue growth. So from here going forward, you will continue to see that differentiation on an ongoing basis. The structural change has taken place, and the difference between organic cost growth and organic revenue growth is what you'll see going forward.
Operator, Operator
The next question comes from Sami Kassab with BNP.
Sami Kassab, Analyst
I have three questions, please. The first one is on STM. And given that France, Canada, Switzerland, Finland have yet to renew their long-term journal contract, can you please comment on the renewal campaign? Is it going a little bit better than last year because of Germany? Is it going a little bit less well because of other countries? Can you comment on the Journal renewal contract, please? The second question is on the Legal division. Given the duopolistic nature of the U.S. legal information market and given the sizes of Thomson and your business, historically, organic revenue growth rate for both companies have been quite similar. And Thomson is now talking about 9% organic revenue growth for their legal division; is that a target you think achievable for RELX Legal division as well? Or is Lexis losing market share? And lastly, in the midst of COVID in '21, Erik, you were asked whether Exhibition had a long-term future within RELX. And if my memory serves me well, you then answered that before deciding on the face of the division, you had two key objectives or conditions, which were to normalize post-COVID and to add more technology to the division to improve the value add. Both conditions have been met. Can you update us on the long-term future of Exhibitions within the group?
Erik Engstrom, CEO
On STM, the primary driver of research growth is volume, and we previously discussed the numbers. This year's renewal cycle is progressing well, likely faster than the average of the past few years. It's important to note that the method of purchasing and payment models are becoming less important, as the key factor remains continuous volume growth. Regarding Legal, we find it challenging to interpret how other companies report their growth rates, as their segments don't align with ours. Therefore, I won't comment on their forecasts. From our perspective, the growth rate has not significantly changed since last year, and we reported 6% organic revenue growth for Legal, which includes a robust 10% from print and our news service. We're focused on delivering high-value tools to our customers, and the development of new tools is progressing positively. We respect our competitors, and it’s encouraging to see them succeed, but we don’t perceive any evidence of losing market share or value share. We may have been slightly behind with new AI tools earlier this year, but that’s our perspective, and I suggest you ask them how they view the situation. Moving on to Exhibitions, we have concentrated on recovering from COVID and leveraging data-driven digital tools to enhance value. It's evident that this segment is likely to become a higher value, higher growth, and higher margin business compared to its state before COVID. We can already see that it is more valuable now, and it’s apparent that it will continue to grow in value over the next few years. The question remains about the extent of this value uplift, and while it's too early to gauge its full scale, the trajectory is promising.
Operator, Operator
Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the call over to Erik Engstrom for any closing remarks.
Erik Engstrom, CEO
Well, thank you for joining us today, and I look forward to talking to you again soon.