RELX PLC & RELX NV - Form 20-F Summary (Fiscal Year Ended Dec 31, 2015)
Business Context and Reporting Period
This filing covers the fiscal year ended December 31, 2015, for RELX PLC (England) and RELX NV (Netherlands), which jointly own RELX Group plc. RELX is a global provider of information and analytics for professional and business customers across four segments: Scientific, Technical & Medical (STM); Risk & Business Analytics; Legal; and Exhibitions. The Group operates in over 180 countries with approximately 30,000 employees. Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics
| Metric | 2015 | 2014 | 2013 |
|---|---|---|---|
| Revenue | £5,971 million | £5,773 million | £6,035 million |
| Operating Profit | £1,497 million | £1,402 million | £1,376 million |
| Net Profit (Attributable to Shareholders) | £1,008 million | £955 million | £1,110 million |
| Adjusted Operating Profit | £1,822 million | £1,739 million | £1,749 million |
| Adjusted Operating Margin | 30.5% | 30.1% | 29.0% |
| Cash Generated from Operations | £1,882 million | £1,851 million | £1,943 million |
| Net Borrowings | £3,782 million | £3,550 million | £3,072 million |
| Dividends Paid (Total) | £583 million | £565 million | £549 million |
Note: Adjusted Operating Profit excludes amortization of acquired intangible assets, acquisition-related costs, and other non-operating items.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 3% to £5,971 million. Underlying revenue growth was 3%, driven by all four segments. Currency effects contributed a 1% increase, while acquisitions added 2% and disposals reduced growth by 2%.
- Profitability: Operating profit rose 7% to £1,497 million. Adjusted operating profit increased 5% to £1,822 million, with underlying growth of 5% outpacing revenue due to tight cost control.
- Segment Performance:
- Risk & Business Analytics: Strongest performer with 11% revenue growth and 14% adjusted operating profit growth.
- STM: Revenue grew 1% with flat adjusted operating profit.
- Legal: Revenue grew 3% with 5% adjusted operating profit growth.
- Exhibitions: Revenue declined 4% due to currency effects and cycling, though underlying revenue grew 5%.
- Costs: Total operating costs increased 3%, primarily due to staff costs and exchange rates. Underlying operating costs rose 1%.
- Debt: Net borrowings increased to £3,782 million, partly due to the strengthening of the US dollar against sterling.
Guidance, Outlook, and Risks
- Dividends: The Board proposed a 2015 final dividend of 22.3p for RELX PLC (total 29.7p for the year) and €0.288 for RELX NV (total €0.403 for the year). Dividend growth is aligned with adjusted earnings growth.
- Share Repurchases: The company repurchased £500 million of shares in 2015. In February 2016, they announced a new program to repurchase up to £600 million of shares for the remainder of 2016.
- Key Risks:
- Currency: Significant exposure to USD and EUR fluctuations impacts reported results.
- Regulatory: Compliance with FTC Settlement Orders regarding data security and privacy; potential changes in tax laws (OECD Base Erosion and Profit Shifting).
- Market: Dependence on government/academic funding for STM content; competition in digital platforms; cybersecurity threats.
- Impairment: Goodwill and indefinite-lived intangible assets (£5,231 million and £103 million respectively) require annual testing based on judgmental assumptions.
Investor Verification Checklist
- Verify the impact of the abolition of UK dividend tax credits (effective April 2016) on future EPS calculations and dividend equalization between PLC and NV shares.
- Review the specific terms and compliance status of the FTC Settlement Orders and the Assurance of Voluntary Compliance (AVC) regarding data security.
- Assess the sustainability of the 30.5% adjusted operating margin given the continued decline in print revenue and investment in electronic platforms.
- Monitor the execution of the £600 million share repurchase program announced in February 2016.
- Examine the sensitivity of net borrowings to further USD/GBP exchange rate fluctuations, as the majority of debt is USD-denominated.