RELX PLC — FY 2019 Form 20-F
Reporting period: Year ended December 31, 2019; filed February 20, 2020. This is an annual report, not a standalone 2019 fourth-quarter filing. Financial statements are audited and prepared under IFRS as issued by the IASB. Amounts below are in pounds sterling unless noted.
Business context
RELX is a global information-based analytics and decision-tools provider operating in Scientific, Technical & Medical (STM), Risk & Business Analytics, Legal, and Exhibitions. It serves customers in more than 180 countries. Electronic products accounted for 75% of revenue.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | £7,874m | £7,492m |
| Reported operating profit | £2,101m | £1,964m |
| Adjusted operating profit | £2,491m | £2,346m |
| Reported operating margin | 26.7% | 26.2% |
| Adjusted operating margin | 31.6% | 31.3% |
| Profit before tax | £1,847m | £1,720m |
| Net profit attributable to RELX PLC shareholders | £1,505m | £1,422m |
| Adjusted net profit attributable to shareholders | £1,808m | £1,674m |
| Reported / adjusted earnings per share | 77.4p / 93.0p | 71.9p / 84.7p |
| Cash generated from operations | £2,724m | £2,555m |
| Borrowings / net borrowings | £6,414m / £6,191m | £6,365m / £6,177m |
- Revenue rose 5% as reported and 4% underlying; adjusted operating profit increased 6% as reported and 5% underlying. Management cited good growth in electronic and face-to-face revenue, partly offset by declining print revenue, and process innovation.
- Revenue by segment: STM £2,637m (+4% reported; +2% underlying); Risk & Business Analytics £2,316m (+9%; +7%); Legal £1,652m (+2%; +2%); Exhibitions £1,269m (+4%; +6%). Underlying growth excludes currency and portfolio effects; Exhibitions underlying growth also excludes event cycling.
- Cash and cash equivalents were £138m at year-end. RELX reported £2.071bn in subscriptions and other revenue received in advance. Committed bank facilities of $3bn were undrawn. Management said liquidity and access to debt markets were ample.
- Cash investment included £333m in internally developed intangible assets and £47m in property and equipment purchases. Acquisition payments were £429m. Cash flow from operations is disclosed, but the supplied filing text does not provide a clear standalone free-cash-flow figure.
- Proposed FY 2019 dividend was 45.7p per share, versus 42.1p for 2018. RELX repurchased shares for £600m in 2019.
Material changes and unusual items
- Net finance costs increased to £305m from £211m, including a £99m charge for early redemption of bonds originally due in October 2022. The $950m bond was redeemed in January 2020.
- Reported profit included £51m of gains on disposals and other non-operating items, compared with a £33m loss in 2018. The reported tax charge was £338m and included an £89m credit related to resolution of historical tax issues.
- Currency translation increased 2019 revenue by £222m and operating profit by £64m, according to management. The stronger US dollar versus sterling benefited reported results.
- At year-end, total assets were £13.789bn, compared with £13.999bn in 2018; shareholders’ equity was £2.166bn, compared with £2.329bn.
Outlook, risks and contingencies
- The filing provides no specific consolidated numerical earnings guidance. Management reported underlying growth across all four segments in 2019 and continued investment in products and analytics.
- For 2020, Tokyo venue constraints could reduce Exhibitions’ divisional revenue growth by one or two percentage points. Management said the potential impact of the novel coronavirus outbreak on business in China and elsewhere was uncertain.
- Principal risks include economic and political conditions; competition and technology change; data privacy, cybersecurity and access to third-party data; regulation and intellectual-property protection; reliance on digital platforms and service providers; talent retention; pension assumptions; tax uncertainty; foreign-exchange and funding risks; and possible impairment of goodwill and intangible assets.
- Goodwill was £6.824bn at year-end. The annual impairment assessment depends on judgmental cash-flow, growth and discount-rate assumptions. Internally developed intangible-asset capitalization (£333m in 2019) and uncertain tax positions were highlighted as areas requiring significant judgment and as critical audit matters.
- Data-security and privacy proceedings and regulatory settlements require ongoing compliance monitoring. The company stated that these and other ordinary-course legal proceedings were not expected to have a material adverse effect. It also disclosed £1.8m of Iran-related revenue in 2019, down from £7.1m in 2018.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; controls were assessed as effective at December 31, 2019.
Important facts for investors to verify
- Reconcile reported and adjusted profit, EPS and margins; adjusted measures are non-IFRS and depend on management-defined exclusions.
- Review debt maturity and refinancing exposure, including £1.967bn of short-term borrowings at year-end and the subsequent bond redemption; assess liquidity alongside the undrawn $3bn facilities.
- Check the assumptions supporting goodwill impairment tests, capitalized development costs and uncertain-tax provisions.
- Assess whether digital and analytics growth can offset print declines, and monitor the sensitivity of Exhibitions to event cycling, venue constraints and the coronavirus outbreak.
- Monitor data-security, privacy and regulatory compliance, foreign-exchange exposure, and the sustainability of dividends and share repurchases against cash generation.