RELX PLC — FY2018 Form 20-F
Reporting period: Year ended December 31, 2018; filed February 28, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB. The group completed its corporate simplification on September 8, 2018, with RELX PLC becoming the single parent company.
Business context and financial performance
RELX is a global provider of information-based analytics and decision tools, operating in Scientific, Technical & Medical (STM), Risk & Business Analytics, Legal, and Exhibitions. Reported results include the effects of currency, acquisitions and disposals; management also presents non-IFRS adjusted and underlying measures.
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | £7,492m | £7,341m |
| Reported operating profit | £1,964m | £1,905m |
| Adjusted operating profit | £2,346m | £2,284m |
| Reported operating margin | 26.2% | 26.0% |
| Adjusted operating margin | 31.3% | 31.1% |
| Profit before tax | £1,720m | £1,721m |
| Net profit attributable to RELX PLC shareholders | £1,422m | £1,648m |
| Adjusted net profit attributable to shareholders | £1,674m | £1,620m |
| Reported / adjusted earnings per share | 71.9p / 84.7p | 81.6p / 80.2p |
| Cash generated from operations | £2,555m | £2,526m |
| Net borrowings | £6,177m | £5,042m |
Underlying revenue and adjusted operating profit each grew 4% at constant currency. Reported revenue rose 2%, while adjusted operating profit increased 3%. Electronic products accounted for 74% of revenue, face-to-face events 16%, and print 10%. Subscription revenue was £3,889m (52% of the total).
Segment revenue and adjusted operating profit were: STM £2,538m and £942m; Risk & Business Analytics £2,117m and £776m; Legal £1,618m and £320m; Exhibitions £1,219m and £313m. Underlying revenue growth was strongest in Risk & Business Analytics at 8%; Exhibitions grew 6%, while STM and Legal each grew 2%.
Cash flow, debt and shareholder returns
- Cash generated from operations was £2,555m. Internally developed intangible asset and property/equipment cash investment totaled £362m (£306m and £56m, respectively). Acquisition payments were £960m, compared with £141m in 2017.
- Net borrowings increased £1,135m to £6,177m; excluding currency effects, the increase was £889m. Year-end cash and cash equivalents were £114m. Total assets were £13,999m and shareholders’ equity £2,329m.
- A new undrawn $3.0bn committed bank facility replaced the former $2.0bn facility. It comprises tranches maturing in 2021 and 2023. The company stated it believed liquidity and debt-market access were ample.
- Debt and lease contractual obligations totaled £7,181m, including £1,542m due within one year. The filing reports no material off-balance-sheet arrangements beyond disclosed contractual obligations.
- Share repurchases totaled £700m and dividends paid were £796m. The proposed final dividend was 29.7p per share, giving a proposed full-year dividend of 42.1p, up from 39.4p. RELX announced a further £500m repurchase intention for the remainder of 2019.
Material changes, outlook and risks
- Reported shareholder net profit fell 14%, largely because 2017 included a £346m exceptional, non-cash tax credit from the US Tax Cuts and Jobs Act. FY2018 included a £112m exceptional tax credit related to prior-year tax matters and tax-rate changes. Adjusted net profit rose 3% and adjusted EPS rose 6%.
- Revenue growth was supported by electronic and face-to-face offerings, while print continued to decline. Legal reported revenue fell 4%, reflecting portfolio and currency effects, despite 2% underlying growth. Exhibitions revenue rose 10%, including cycling-in effects.
- Management said Tokyo Olympic Games venue constraints could reduce Exhibitions’ underlying revenue growth by about one percentage point in 2019 and 2020. The filing does not provide a clear consolidated numerical earnings or revenue guidance range.
- Acquisition spending increased substantially, including purchases in Risk & Business Analytics and smaller acquisitions across other segments. Management noted that it updated its underlying-growth calculation in 2018 to include acquisition results from 12 months after completion.
- Key disclosed risks include economic and political uncertainty, Brexit, competition and technology change, data privacy and cyber security, third-party data access, regulation and FTC settlement-order compliance, STM publishing-model shifts, acquisition execution, pension assumptions, tax changes, foreign exchange, refinancing and credit conditions, and potential impairment of goodwill and intangibles.
- Iran-related activities generated approximately £7.1m of 2018 revenue; estimated net profit from these activities was 0.09% of reported net profit. US data-security and privacy proceedings were substantially settled; the company said ongoing monitoring and compliance costs were not expected to materially affect results or financial position.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor concluded controls were effective at year-end.
Important facts for investors to verify
- Reconcile reported and adjusted profit, EPS, margins and the exceptional tax items, particularly the unusually large 2017 tax credit.
- Review the full cash-flow statement and debt notes, including acquisition funding, maturities, lease liabilities, leverage and the effect of sterling translation.
- Assess whether underlying growth definitions, acquisition contributions and Exhibitions cycling effects are comparable across periods.
- Monitor Legal portfolio changes, continued print declines, data-security compliance, and the stated Tokyo venue-capacity constraint.
- Confirm the proposed dividend, subsequent share repurchases and the timing and terms of announced capital returns against later company disclosures.