RELX PLC / RELX NV — Form 20-F summary
Reporting period: Fiscal year ended December 31, 2017. Filed February 22, 2018. This is an annual report, not a standalone Q4 filing. Financial data relates to the consolidated RELX Group, jointly owned by RELX PLC (52.9%) and RELX NV (47.1%), and is prepared under IFRS.
Business context and key financial metrics
RELX provides information and analytics in Scientific, Technical & Medical (STM), Risk & Business Analytics, Legal, and Exhibitions. It serves customers in more than 180 countries. Amounts below are in pounds sterling unless noted.
| Metric | FY 2017 | FY 2016 | Change / context |
|---|---|---|---|
| Revenue | £7,355m | £6,895m | +7% reported; +4% underlying at constant currency |
| Reported operating profit | £1,905m | £1,708m | +12% |
| Adjusted operating profit | £2,284m | £2,114m | +8% reported; +6% underlying |
| Operating margin | 25.9% reported; 31.1% adjusted | 24.8% reported; 30.7% adjusted | Adjusted margin +0.4 percentage points |
| Profit before tax | £1,734m | £1,473m | |
| Net profit attributable to shareholders | £1,659m | £1,161m | +43%; includes exceptional US tax reform credit |
| Adjusted net profit attributable to shareholders | £1,635m | £1,488m | +10% |
| Cash generated from operations | £2,445m | £2,236m | |
| Net borrowings | £4,732m | £4,700m | Gross borrowings £4,886m; cash £111m; related derivative assets £43m |
Reported revenue mix: STM £2,478m (34%); Risk & Business Analytics £2,076m (28%); Legal £1,692m (23%); Exhibitions £1,109m (15%). Electronic sales were 74% of revenue, subscriptions 52%, and North America 56%.
Material changes versus the prior year
- Reported revenue growth slowed to 7% from 15% in 2016, while underlying revenue growth held at 4%. Currency translation contributed £351m to reported revenue growth; underlying growth excludes currency, portfolio changes and exhibition cycling.
- Adjusted operating profit rose 8%, versus 16% in 2016. Tight cost control supported a 0.4-point increase in adjusted margin.
- The reported tax charge fell to £67m from £304m, principally because the US Tax Cuts and Jobs Act generated an exceptional deferred-tax credit of £346m. The resulting reported profit and EPS growth therefore include a material one-off benefit.
- Cash generated from operations increased to £2,445m. Capital expenditure on property, equipment and internally developed intangibles was £354m, including £303m on internally developed intangibles.
- Net borrowings were broadly flat year over year, while the statement of financial position reported non-current borrowings of £4,208m, compared with £3,684m in 2016.
Liquidity, capital returns and outlook
- The Group reported an undrawn $2.0bn committed bank facility maturing in July 2020 and stated it had ample liquidity and access to debt markets. Contractual debt and lease obligations totalled £6,093m, including £909m due within one year.
- Cash generated from operations included £42m of acquisition-related cost outflows. Revenue received in advance was £1,834m at year end, down from £1,941m.
- Share repurchases totalled £700m in 2017; dividends paid totalled £762m. Boards proposed full-year dividends of 39.4p per RELX PLC share and €0.448 per RELX NV share. A further £600m aggregate buyback was announced for the remainder of 2018.
- Management’s commentary describes positive underlying growth across all four segments and continued investment in digital products, analytics and infrastructure. The filing does not provide a clear quantified 2018 revenue or profit forecast.
- The Group proposed simplifying its dual-parent structure into a single RELX PLC parent, subject to shareholder approval, with implementation expected in Q3 2018. Management said the change would be cost- and profit-neutral and would not alter shareholders’ economic interests.
Risks, contingencies and unusual items
- Key risks include data privacy and cybersecurity incidents, regulatory changes including GDPR, reliance on third-party data and outsourced services, intellectual-property protection, competition and technology shifts, and possible changes to STM subscription funding models.
- Other material exposures include economic and government-funding conditions, currency and interest-rate movements, pension assumptions, tax-law changes, acquisition integration and impairment risk. Goodwill was £5,965m and indefinite-lived intangible assets were £112m; impairment testing depends on judgmental cash-flow, growth and discount-rate assumptions.
- US subsidiaries have faced data-security and privacy proceedings and regulatory actions. Principal actions and investigations were settled; the company said most agreed cash payments were reimbursed by insurance and third-party indemnities, and ongoing monitoring costs were not expected to materially affect financial position or results. Other ordinary-course proceedings were also not expected to have a material adverse effect.
- Iran-related activities generated approximately £13.5m of gross revenue in 2017; estimated net profit was 0.18% of reported net profit. The filing says similar transactions may occur and notes uncertainty in determining ownership or control of customers.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management reported effective disclosure controls and financial-reporting controls as of year end, with no material control changes during the year.
Important facts for investors to verify
- Reconcile reported earnings, EPS and tax measures to adjusted results, particularly the £346m exceptional US deferred-tax credit and its effect on comparisons.
- Review the full cash-flow statement, debt maturities, covenants and leverage measures; the filing’s selected figures do not provide a standalone free-cash-flow total.
- Assess whether underlying growth and margin trends persist by segment, separating organic performance from currency, acquisitions, disposals and exhibition cycling.
- Check the status and final terms of the proposed corporate simplification, proposed dividends and announced 2018 buybacks.
- Review the full notes on cybersecurity/privacy matters, Iran-related transactions, pension liabilities, goodwill impairment assumptions and exposure to currency and interest-rate movements.