TTAI Holding RELX uses free cash flow to acquire 9 companies and repurchase shares
RELX Plc, a global provider of information-based analytics and decision-making tools and a stake in the FCF International Quality ETF (TTAI), reported free cash flow of almost £2 billion ($2.5 billion) for 2022, up 18% from a year earlier. The company’s chief financial officer, Nick Luff, said RELX spent that free cash flow on acquisitions, dividends and stock buybacks.
During the year, RELX made nine acquisitions, totaling £443 million. The most notable of these acquisitions includes BehavioSec, a behavioral biometrics company; Flyreel, a self-inspection app for home insurance; and Interfolio, a university faculty management and higher education technology software company.
Total dividend payments during the year were £983m and RELX resumed its share buyback program in 2022, rolling out £500m.
RELX CEO Erik Engstrom said in a statement that the company “intends to deploy a total of £800 million in share buybacks in 2023”.
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Free cash flow is the sum of net cash provided by operating activities and net cash flow used in investing activities. This measure is useful for assessing the cash available for financing activities, including distributions to shareholders, after investing in the business. It’s also a much better way to measure long-term profitability than GAAP earnings, according to investment manager FCF Advisors.
“At FCF Advisors, we offer a unique way to assess the quality of investments,” said Vince (Qijun) Chen, Director of Research and Portfolio Manager at FCF Advisors. “We measure profitability with free cash flow instead of earnings, which are subject to manager discretion.”
FCF Advisors specializes in free cash flow investment strategies primarily through its Free Cash Flow Quality Model (FCFQM), a multi-factor model featuring a combination of research-informed quality metrics. ‘business.
TTAI aims to outperform the MSCI All Country World ex-US Index through an active investment process. A quantitative model is used to rank stocks based on proprietary measures of free cash flow. Approximately 140 of the top ranked stocks are selected and then weighted on a modified market capitalization basis.
The fund’s portfolio is also rated with an ESG score, excluding companies with low ESG ratings. Companies with an extreme increase in the number of shares and an increase in debt are also excluded.
“Over the past few quarters, the market has demanded profitability, and we’ve measured profitability by free cash flow,” said Bob Shea, CIO of FCF Advisors. “Free cash flow has never been more important.”
TTAI has an expense ratio of 0.59%.
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