SEC Filing Summary: RELX PLC (Reed International P.L.C. & Elsevier NV)
Business Context and Reporting Period
This Form 20-F is an annual report for the fiscal year ended December 31, 1997, filed on March 27, 1998. The registrants are Reed International P.L.C. (England) and Elsevier NV (Netherlands), which operate as a single economic group known as Reed Elsevier following a 1993 merger. The company is a leading global publisher and information provider in scientific, professional, and business sectors. Operations are managed through Reed Elsevier plc (publishing) and Elsevier Reed Finance BV (treasury), with shareholders of both parent companies enjoying equalized dividend and capital rights.
Key Financial Metrics (Year Ended Dec 31, 1997)
| Metric | Reed Elsevier Combined (U.K./Dutch GAAP) | Reed International (U.K. GAAP) | Elsevier (Dutch GAAP) |
|---|---|---|---|
| Net Sales | £3,417 million | N/A (Holding Co) | N/A (Holding Co) |
| Operating Income (Pre-Exceptional) | £885 million | N/A | N/A |
| Net Income | £207 million | £90 million | Dfl 330 million |
| Adjusted Net Income (Excl. Exceptional) | £608 million | N/A | N/A |
| Net Borrowings | £630 million | N/A | N/A |
| Shareholders' Equity | £1,494 million | £790 million | Dfl 2,495 million |
| Dividends Paid | £365 million (Combined) | £167 million | Dfl 198 million |
Note: Reed International and Elsevier are holding companies; their financial statements reflect their equity interest in the combined businesses. Combined figures are presented in Pounds Sterling (£).
Material Changes vs. Prior Period
- Revenue: Total net sales increased 1% to £3,417 million. At constant exchange rates, continuing operations grew 11%, driven by acquisitions (MDL Information Systems, Chilton Business Group) and organic growth. Currency translation reduced reported sales by £232 million due to a stronger Sterling.
- Profitability: Reported Net Income dropped significantly to £207 million from £604 million in 1996. This decline is primarily due to exceptional charges of £477 million. On an adjusted basis (excluding exceptional items), net income was flat at £608 million compared to £603 million in 1996.
- Exceptional Items: The 1997 results included a £230 million provision for customer compensation regarding circulation irregularities at Reed Travel Group, a £250 million non-cash write-down of Reed Travel Group intangible assets, and costs related to the abandoned merger with Wolters Kluwer.
- Divestitures: The company continued its strategy of exiting consumer markets. IPC Magazines was sold in January 1998 (post-balance sheet) for £860 million. Consumer book publishing (Reed Books) and consumer magazines were largely divested or categorized as discontinued operations.
Guidance, Outlook, and Risks
- Strategic Direction: Management remains focused on professional, scientific, and business information markets. The company is investing heavily in electronic publishing and information management systems (e.g., ScienceDirect, LEXIS-NEXIS online).
- Abandoned Merger: The proposed merger with Wolters Kluwer was abandoned in March 1998 due to regulatory concerns and revised terms. Management stated this does not affect the strategic direction.
- Year 2000 Compliance: The company estimates total compliance costs at approximately £75 million, with £11 million incurred in 1997. Remediation is expected to be completed by the end of 1998.
- Reed Travel Group (RTG): Significant risks were identified regarding circulation irregularities. A compensation program was implemented, and the business was restructured in January 1998, with parts integrated into Cahners Business Information and Reed Business Information.
- Currency Risk: The company faces exposure to the U.S. Dollar and Dutch Guilder. Hedging policies are in place to minimize translation and transaction risks.
Investor Verification Checklist
- Exceptional Charges: Verify the adequacy of the £230 million provision for Reed Travel Group compensation and the £250 million intangible asset write-down.
- Adjusted Earnings: Confirm the "Adjusted Net Income" of £608 million as a more accurate reflection of underlying operational performance compared to the reported £207 million.
- Discontinued Operations: Review the status of remaining consumer book publishing assets (Reed Books) and the timing of their disposal.
- Year 2000 Costs: Monitor the total cost of the Y2K compliance program against the £75 million estimate.
- Accounting Standards: Note the significant differences between U.K./Dutch GAAP and U.S. GAAP, particularly regarding goodwill amortization and discontinued operations, which materially affect reported equity and net income.