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www.relxgroup.com
Annual Reports and
Financial Statements
2014
21654 Reed AR 2014 Cover Outer and Inner.indd 1-3
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Credits
Designed and produced by
mslgroup.com
Board photography by
Douglas Fry, Piranha Photography
Printed by
Pureprint Group, ISO14001, FSC® certified and CarbonNeutral®
The 2014 Annual Reports and Financial Statements is printed
using paper containing a minimum of 75% recycled content,
of which 100% is de-inked post-consumer waste. All of the pulp
is bleached using an elemental chlorine free process (ECF).
Printed in the UK by Pureprint using their environmental printing
technology; vegetable inks were used throughout. Pureprint is a
CarbonNeutral® company. Both manufacturing mill and printer
are ISO14001 registered and are Forest Stewardship Council®
(FSC) chain-of-custody certified.
RELX Group is a world-leading provider of
information solutions for professional customers
across industries.
We help scientists make new discoveries, lawyers
win cases, doctors save lives, and executives forge
commercial relationships with their clients. We help
insurance groups offer customers lower prices
by assessing risk better, and save taxpayers and
consumers money by enabling governments and
financial groups to detect fraud.
RELX Group is owned by two parent companies:
Reed Elsevier PLC is the London Stock Exchange
listed vehicle for holding shares in RELX Group.
Shareholders in Reed Elsevier PLC own a 52.9%
economic interest in the Group.
Reed Elsevier NV is the Amsterdam Stock Exchange
listed vehicle for holding shares in RELX Group.
External shareholders in Reed Elsevier NV own a
47.1% economic interest in the Group.
Forward-looking statements
The Reports and Financial Statements 2014 contain forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section
21E of the US Securities Exchange Act of 1934, as amended. These statements are subject to a number of risks and uncertainties that could cause actual results or outcomes
to differ materially from those currently being anticipated. The terms “estimate”, “project”, “plan”, “intend”, “expect”, “should be”, “will be”, “believe”, “trends” and similar
expressions identify forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but are not
limited to competitive factors in the industries in which the Group operates; demand for the Group’s products and services; exchange rate fluctuations; general economic and
business conditions; legislative, fiscal, tax and regulatory developments and political risks; the availability of third-party content and data; breaches of our data security
systems and interruptions in our information technology systems; changes in law and legal interpretations affecting the Group’s intellectual property rights and other risks
referenced from time to time in the filings of the Group with the US Securities and Exchange Commission.
94118_Reed_AR_Cover.indd 4-6
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RELX Group Annual Reports and Financial Statements 2014
1
Contents
Get more information online
A full pdf of the Annual Report and further
information about the Group and our
businesses can be found online at our
corporate website: www.relxgroup.com
Overview*
2
3
4
2014 Financial highlights
Chairman’s statement
Chief Executive Officer’s report
Business review*
8
14
20
26
32
37
The Group
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Corporate responsibility
Financial review*
50
58
Chief Financial Officer’s report
Principal risks
Governance
62
64
66
68
74
75
89
Board Directors
The Group Business Leaders
Chairman's introduction to Corporate Governance
Corporate Governance
Report of the Nominations Committee
Directors' Remuneration Report
Report of the Audit Committees
Financial statements and
other information
91
135
147
165
187
191
194
195
196
Combined financial statements
Summary combined financial information in euros
Reed Elsevier PLC Annual Report and Financial Statements
Reed Elsevier NV Annual Report and Financial Statements
Summary financial information in US dollars
Shareholder information
Contacts
2015 financial calendar
Principal operating locations
* Comprises the Strategic Report in accordance with The (UK) Companies
Act 2006 (Strategic Report and Directors Report) Regulations 2013.
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2
OVERVIEW
RELX Group
2014 Financial highlights
§ Underlying revenue up 3% (excluding exhibition cycling effects)
§ Underlying adjusted operating profit up 5%
§ Adjusted EPS 56.3p (54.0p) for Reed Elsevier PLC; €1.07 (€0.99) for Reed Elsevier NV; +10%
constant currency
§ Reported EPS 43.0p (48.8p) for Reed Elsevier PLC; €0.85 (€0.91) for Reed Elsevier NV
§ Full year dividend up 6% to 26.0p for Reed Elsevier PLC and up 16% to €0.589 for Reed Elsevier NV
§ Return on invested capital up 0.7pts to 12.8%
§ Net debt at £3.5bn; 2.3x EBITDA pensions and lease adjusted (1.7x unadjusted)
Reed Elsevier combined businesses
REVENUE
ADJUSTED OPERATING PROFIT
£m
€m
£m
€m
Underlying Growth +3%
Underlying Growth +5%
7,121
7,159
2,064
2,156
6,035
5,773
1,749
1,739
2013
2014
2013
2014
2013
2014
2013
2014
Parent companies
REED ELSEVIER PLC
Adjusted EPS
pence
Growth +4%
56.3
54.0
Dividend
pence
Growth +6%
24.6
26.0
REED ELSEVIER NV
Adjusted EPS
€
Growth +8%
0.99
1.07
Dividend
€
Growth +16%
0.506
0.589
2013
2014
2013
2014
2013
2014
2013
2014
The Reed Elsevier combined businesses (or “the combined businesses”) in 2014 encompassed the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV, together with
their two parent companies, Reed Elsevier PLC and Reed Elsevier NV (the “Reed Elsevier combined businesses”). Effective 25 February 2015, ownership of Elsevier Reed Finance BV was
transferred to Reed Elsevier Group plc and this newly combined single group entity was named RELX Group plc. A full description is set out on pages 66 and 67.
Adjusted and underlying figures are additional performance measures used by management. Adjusted figures are reconciled to the reported figures in note 10 to the combined
financial statements and note 9 to the respective parent company financial statements. Underlying growth rates are calculated at constant currencies and exclude the results
of all acquisitions and disposals made in both the year and prior year and assets held for sale. Underlying revenue growth rates also exclude the effects of exhibition cycling.
Constant currency growth rates are based on 2013 full year average and hedge exchange rates. The underlying growth in revenue and in adjusted operating profit are the key
performance indicators used by the Group in assessing performance.
94118_Reed_AR_p001-006.indd 2
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RELX Group Annual Reports and Financial Statements 2014
3
Chairman’s statement
Balance sheet
Net debt was £3.5bn/€4.6bn on 31 December 2014, compared with
£3.1bn/€3.7bn last year. Net debt/EBITDA on a pensions and lease
adjusted basis for 2014 was 2.3x, up from 2.1x last year, and on an
unadjusted basis, it was 1.7x, up from 1.6x last year. Adjusted cash
flow conversion was 96%, down from 97% in 2013, with capital
expenditure at 4.7% of revenues.
Share buybacks
During the year, we continued with our share buyback programme.
In 2014, we deployed a total of £600m on share buybacks.
In 2015, we intend to deploy a total of £500m on share buybacks.
By February, £100m of this year’s total had already been completed,
leaving a further £400m to be deployed during the year.
The Boards
Following the resignation of Duncan Palmer, Nick Luff joined the
Group as Chief Financial Officer in September. I would like to take
this opportunity to thank Duncan for his contributions over two
years, and welcome Nick to our Boards.
Corporate structure and corporate entity names
We are proposing measures to shareholders at our Annual General
Meetings in April which will simplify our corporate structure,
clarify the economic interests of parent company shareholders,
and increase share price transparency. None of the changes
impact the economic interests of any shareholder.
We are also proposing to shareholders to align the two parent
company names with RELX Group plc, the name that we adopted
for the new single group entity on 25 February. The proposed new
names are RELX PLC for the London listed shareholding vehicle
and RELX NV for the Amsterdam listed shareholding vehicle.
We believe it to be in the interests of the shareholders of both
parent companies to make the company into a more
understandable group with a more modern name to reflect
where the company is today.
Corporate responsibility
We remain focused on corporate responsibility, which continues to
be a source of strength at the company. The Boards are particularly
proud of the initiatives we are taking, which build on our unique
contributions to society. Our commitment to the highest standards
of ethical management also underpins the vitality of the company.
Here, the Boards monitor performance to ensure sustained
progress in areas ranging from governance and diversity to
responsible supply chain management.
Anthony Habgood
Chairman
Anthony Habgood
Chairman
Once again underlying revenue
and profits grew across all major
business units during 2014, as we
continued to streamline our
operations. We are now proposing
measures that will modernise and
simplify our corporate structure,
increasing transparency without
impacting the economic interests
of shareholders.
Growth of underlying revenues, which exclude the effects of
currency translation, acquisitions, disposals and biennial
exhibitions cycling, was 3%. Underlying adjusted operating profits
grew 5%, with the improvement in profitability reflecting a
combination of underlying revenue growth, process innovation
and portfolio development. Adjusted operating profits fell 1% to
£1,739m expressed in sterling, and increased 4% to €2,156m
expressed in euros.
Adjusted earnings per share grew 4% to 56.3p for Reed Elsevier
PLC, and 8% to €1.07 for Reed Elsevier NV. Reported earnings per
share fell 12% to 43p for Reed Elsevier PLC, and 7% to €0.85 for
Reed Elsevier NV. The year-on-year declines largely reflect the
absence of a non-recurring tax credit which was taken in 2013.
Dividends
The Boards are recommending equalised final dividends of 19.00p
for Reed Elsevier PLC and €0.438 for Reed Elsevier NV, up
respectively 6% and 17% against the prior year. This brings the total
dividends for the year to 26.00p for Reed Elsevier PLC, up 6% and
€0.589 for Reed Elsevier NV, up 16%. The differing growth rates of
the interim and final dividends for the two parent companies reflect
movements in the sterling-euro exchange rate between dividend
announcement dates.
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06/03/2015 08:42
4
OVERVIEW
CHIEF EXECUTIVE OFFICER’S REPORT
Chief Executive Officer’s report
Strategic direction
Our strategy remains consistent: to become a global professional
information solutions provider, a company that delivers improved
outcomes for professional customers across industries. Our goal
is to help our customers make better decisions, get better results
and be more productive. We do this by leveraging a deep
understanding of our customers to create innovative solutions
which combine content and data with analytics and technology in
global platforms. These solutions often account for about 1% of
our customers’ total cost base but can have a significant and
positive impact on the economics of the remaining 99%.
We aim to build leading positions in long-term global growth
markets and leverage our skills, assets and resources across
the company, both to build solutions for our customers and to
pursue cost efficiencies.
During the year we continued to make progress in this strategic
direction. We are systematically migrating all of our businesses
towards electronic decision tools, adding broader data sets,
embedding more sophisticated analytics and leveraging more
powerful technology, primarily through organic development.
We are transforming our core business, building out new products
and expanding into higher growth adjacencies and geographies.
We are supplementing this organic development with selective
acquisitions of targeted data and content sets, and assets in
high-growth markets and geographies, where we are the natural
owner and can accelerate our strategy with good returns.
We continue to divest assets that we are unable to migrate
or where we do not see significant future value creation.
By focusing on evolving the fundamentals of our business we
believe that, over time, we are improving our business profile
and the quality of our earnings. This is leading to more predictable
revenues through a better asset mix and geographic balance;
a higher growth profile by expanding in higher growth segments,
exiting from structurally challenged businesses and gradually
reducing the drag from print format declines; and improved
returns by focusing on organic development with strong
cash generation.
Erik Engstrom
Chief Executive Officer
In 2014, we maintained good
momentum across our key
financial metrics of underlying
revenue growth, underlying
operating profit growth, adjusted
earnings per share growth,
and return on invested capital.
We made further strategic and
operational progress as we
continued to transform our
business, primarily through
organic development.
UNDERLYING REVENUE GROWTH*
UNDERLYING ADJUSTED OPERATING PROFIT GROWTH
+3%
+3%
+3%
+3%
+5%
+6%
+5%
+5%
2011
2012
2013
2014
2011
2012
2013
2014
* Excluding cycling effects.
94118_Reed_AR_p001-006.indd 4
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RELX Group Annual Reports and Financial Statements 2014
5
2014 progress
In 2014, we made further strategic and operational progress,
as we continued to transform our business, primarily through
organic development.
With 82% of revenues in our targeted formats of electronic and
face-to-face, generating average underlying revenue growth
rates of 5% to 7%, we are now primarily focused on driving the
transition from electronic reference to electronic decision tools.
Our transition away from advertising and marketing services is
substantially complete.
In 2014, we continued to focus our acquisitions on targeted data
sets and analytics, and assets in high-growth markets that
support our organic growth strategies. We completed 27
acquisitions for a total consideration of £385m. We also continued
to dispose of assets across business areas, closing 17 small
transactions for a total consideration of £74m.
With a strong balance sheet, strong cash flow characteristics and
with average acquisition spend comfortably covered by free cash
flow after dividends, we continued to take a pragmatic approach to
ensuring that the value compounding within the business
translates into shareholder value. As part of this we maintained
our share buyback programme at £600m in 2014.
We are now extending our efforts to modernise and simplify the
company to our corporate structure, our share listings and our
corporate entity names. Ownership of all businesses, subsidiaries
and financing activities below the two listed parent companies has
been transferred to one new single group entity for the first time.
This newly-formed single group entity is the result of combining
Reed Elsevier Group plc and Elsevier Reed Finance BV. In addition,
we are proposing to eliminate the cross-shareholding between
the two parent companies and align their direct equity holdings in
the new single group entity with their external shareholders’
respective economic interests of 52.9% and 47.1%. We also
propose to simplify our share listings and increase share price
transparency by moving the equalisation ratio for all our share
listings to one-to-one from 1 July 2015.
The newly-combined single group entity has been named RELX
Group plc. We believe this shorter and more modern name
reflects the transformation of the company to a technology,
content and analytics-driven business, while maintaining the link
with our proud heritage names. We are proposing to align the
names of the parent companies, Reed Elsevier PLC and Reed
Elsevier NV, with that of RELX Group plc on 1 July, to RELX PLC
for the London listed shareholding vehicle, and RELX NV for the
Amsterdam listed shareholding vehicle. There will not be any
brand or name changes for any customer-facing products or
business units.
Financial performance
We maintained good momentum throughout 2014 across our four
key financial metrics. Underlying revenue growth, excluding
exhibition cycling effects, was 3%. Underlying operating profit
growth was 5%. Earnings per share at constant currencies grew
10%, and our return on invested capital increased by 0.7
percentage points to 12.8%.
All four major business areas again delivered underlying revenue
and profit growth. We improved profitability through process
innovation and portfolio development.
Scientific, Technical & Medical saw double digit growth in
subscription journal article submissions and usage, and we
saw continued good growth in Databases and Tools, with good
electronic revenue growth across all segments.
Strong underlying revenue growth in Risk & Business Information
was driven by volume growth, new product roll-outs and
adjacency expansion across segments.
Legal underlying revenue growth was maintained in 2014,
in subdued markets, with continued growth in online revenues
largely offset by print declines. The roll-out of new platform and
product releases continued as planned with adoption and usage
progressing well.
Exhibitions maintained strong underlying revenue growth. While
growth in Europe was modest, the US, Japan and other markets
grew strongly.
EARNINGS PER SHARE GROWTH
Constant currency
RETURN ON INVESTED CAPITAL
+8%
+7%
+6%
+10%
11.2%
11.7%*
12.1%
12.8%
2011
2012
2013
2014
2011
2012
2013
2014
* 2012 ROIC restated for IAS19.
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06/03/2015 08:42
6
OVERVIEW
CHIEF EXECUTIVE OFFICER’S REPORT
Corporate responsibility
We prioritise our unique contributions to society, including
universal sustainable access to information; advancement of
science and health; access to justice and the rule of law; and
protection of society. In 2014, for example, we supported
indigenous African research through Publishers Without Borders;
advanced Business for the Rule of Law with the United Nations
Global Compact, an initiative that will help businesses further the
rule of law at the national and international level; and helped
recover three missing children through our Automated Delivery
of Alerts on Missing Children (ADAM) programme.
Outlook
Business trends in the early part of 2015 remain consistent with
2014 trends across our business, and we are confident that, by
continuing to execute on our strategy, we will deliver another year
of underlying revenue, profit and earnings growth in 2015.
Erik Engstrom
Chief Executive Officer
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
REVENUE BY TYPE
£5,773m
18%
16%
£5,773m
21%
Electronic
Face to face
Print/Other
50%
North America
Europe
Rest of World
£5,773m
2%
Subscriptions
Transactional
Advertising
66%
29%
47%
51%
94118_Reed_AR_p001-006.indd 6
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RELX Group Annual Reports and Financial Statements 2014
7
Business
review
In this section
RELX Group
8
14 Scientific, Technical & Medical
20 Risk & Business Information
26 Legal
32 Exhibitions
37 Corporate responsibility
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94118_Reed_AR_p007-036.indd 7
06/03/2015 08:49
8
BUSINESS REVIEW
RELX Group
RELX Group
RELX Group is a world-leading provider of information solutions
for professional customers across industries.
We help scientists make new discoveries, lawyers win cases,
doctors save lives and executives forge commercial relationships
with their clients. We help insurance groups offer customers
lower prices by assessing risk better, and save taxpayers and
consumers money by enabling governments and financial groups
to detect fraud.
We achieve this by using our deep customer understanding
to combine high-quality content and data with analytics and
technology in global platforms. These solutions often account for
about 1 percent of our customers’ total cost base but can have a
significant, positive impact on the economics of the remaining
99 percent. We aim to build leading positions in long-term global
growth markets and we are leveraging our institutional skills,
assets and resources across the company, both to build solutions
for our customers and to pursue cost efficiencies.
We continue to evolve into a company that delivers improved
outcomes to professional customers across industries.
We are achieving this primarily through organic development,
supplemented by selective portfolio reshaping.
94118_Reed_AR_p007-036.indd 8
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RELX Group Annual Reports and Financial Statements 2014
9
Reed Elsevier combined businesses
REPORTED FIGURES
2014
£m
5,773
1,402
1,229
955
16.5%
3,550
2014
£m
1,739
30.1%
1,592
1,213
21.0%
1,662
96%
12.8%
For the year ended 31 December
Revenue
Operating profit
Profit before tax
Net profit
Net margin
Net borrowings
ADJUSTED FIGURES
For the year ended 31 December
Operating profit
Operating margin
Profit before tax
Net profit
Net margin
Cash flow
Cash flow conversion
Return on invested capital
Parent companies
Adjusted earnings per share
Reported earnings per share
Ordinary dividend per share
£
2013
£m
6,035
1,376
1,196
1,110
18.4%
3,072
£
2013
£m
1,749
29.0%
1,572
1,197
19.8%
1,703
97%
12.1%
Change
–4%
+2%
+3%
–14%
Change
–1%
+1%
+1%
–2%
2014
€m
7,159
1,738
1,523
1,184
16.5%
4,579
2014
€m
2,156
30.1%
1,974
1,504
21.0%
2,061
96%
12.8%
€
2013
€m
7,121
1,624
1,412
1,310
18.4%
3,686
€
2013
€m
2,064
29.0%
1,855
1,413
19.8%
2,010
97%
12.1%
Change at
constant
currencies
+1%
+8%
+9%
–9%
Change
+1%
+7%
+8%
–10%
Change
underlying
+3%*
Change
underlying
+5%
Change at
constant
currencies
Change
+4%
+6%
+6%
+3%
+5%
+7%
+7%
+3%
Reed Elsevier PLC
Reed Elsevier NV
2014
56.3p
43.0p
26.0p
2013
Change
2014
2013
Change
54.0p
48.8p
24.6p
+4%
–12%
€1.07
€0.85
+6% €0.589
€0.99
€0.91
€0.506
+8%
–7%
+16%
Change at
constant
currencies
+10%
* Excluding exhibition cycling. Had exhibition cycling been included, underlying growth would have been 4%.
The Reed Elsevier combined businesses (or “the combined businesses”) in 2014 encompassed the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV,
together with their two parent companies, Reed Elsevier PLC and Reed Elsevier NV (the “Reed Elsevier combined businesses”). Effective 25 February 2015, ownership of
Elsevier Reed Finance BV was transferred to Reed Elsevier Group plc and this newly combined single group entity was named RELX Group plc. The results of Reed Elsevier PLC
reflect its shareholders’ 52.9% economic interest in the Reed Elsevier combined businesses. The results of Reed Elsevier NV reflect its shareholders’ 50% economic interest
in the Reed Elsevier combined businesses. These respective economic interests of the Reed Elsevier PLC and Reed Elsevier NV shareholders take account of Reed Elsevier
PLC’s 5.8% indirect interest in Reed Elsevier NV.
We serve customers in more than 180 countries
and have 28,500 full-time employees worldwide.
50%
of revenues
GENERATED IN
NORTH AMERICA
82%
of revenues
GENERATED FROM
ELECTRONIC OR FACE-
TO-FACE FORMATS
$1.3bn
technology
SPEND
EVERY YEAR
8,000
technologists
EMPLOYED GLOBALLY
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94118_Reed_AR_p007-036.indd 9
09/03/2015 17:58
10
BUSINESS REVIEW
RELX Group
LEVERAGING INNOVATION
ACROSS THE GROUP:
HPCC SYSTEMS
The company’s big data technology, known as HPCC, allows users to leverage
structured and unstructured data, opening up huge possibilities for our customers.
It powers all of the LexisNexis Risk Solutions’ operations, and now other businesses
across the company are capitalising on its capabilities.
82%
OF NORTH AMERICAN
CUSTOMERS ARE ACTIVATED
TO USE LEXIS ADVANCE AS
OF FEBRUARY 2015
LEXIS ADVANCE
Lexis Advance offers lawyers trusted information and
unique insight supporting all aspects of their daily
work. Powered by HPCC Systems’ big data technology,
and guided by the principle of ‘power in simplicity’,
the new portfolio of content, analytical and
productivity tools delivers results quickly and easily.
More than 4bn connections within the LexisNexis
database are continually explored and updated to
deliver the latest, most accurate results via computer,
tablet or smartphone.
LEGAL PROFESSIONALS WORK UNDER ENORMOUS BUSINESS AND TIME
PRESSURES AS THEY SOLVE COMPLEX PROBLEMS AND MITIGATE RISK
FOR THEIR CLIENTS, AGENCIES AND COMPANIES. THE DATA PROCESSING
POWER OF HPCC SYSTEMS ALLOWS LEXIS ADVANCE TO DIRECTLY
ADDRESS THEIR NEEDS TO QUICKLY TURN INSIGHTS INTO ACTION.
Sean Fitzpatrick
MD, North American Research
Solutions, LexisNexis
94118_Reed_AR_p007-036.indd 10
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RELX Group Annual Reports and Financial Statements 2014
11
90,000bn
possible metric values
Signing ceremony of the Big Data Initiative between Elsevier and University College London.
L–R: (back row) Professor Stephen Caddick, UCL’s Vice-Provost (Enterprise & London); Rt Hon David Willetts, Minister of State for
Universities and Science; Anthony Habgood, Chairman; Nick Fowler (Elsevier)
L–R: (seated) Prof David Price, Vice Provost (Research) UCL; Prof Michael Arthur, President and Provost UCL; Ron Mobed, CEO Elsevier;
Olivier Dumon (Elsevier)
SCIVAL
SciVal offers research institutions an evidence base
to benchmark the productivity and impact of their
research against any of their peers worldwide. It is
powered by a supercomputer, using HPCC Systems.
This allows more than 4,600 institutions and entire
countries to draw on more than 90,000bn possible
metric values, derived from more than 33m Scopus
publications. The results are displayed within a second.
SCIVAL’S HALLMARK IS ITS ENORMOUS
FLEXIBILITY THAT ALLOWS CUSTOMERS TO LOOK
AT THEIR PERFORMANCE IN THEIR OWN WAY.
CUSTOMERS ARE AMAZED TO SEE HOW MANY
OPTIONS SCIVAL OFFERS THEM TO COMPARE
THEMSELVES AGAINST THEIR PEERS.
Marcel Vonder
Head of Product Development
for SciVal
7
years
PERSONAL AUTOMOBILE
POLICY CLAIMS CONTAINED
IN C.L.U.E.® AUTO
C.L.U.E.® AUTO
C.L.U.E.® Auto, part of the LexisNexis Risk Solutions
product suite, provides insurance companies access to
prior claim information to assist them in determining
premiums during the underwriting process. It is the
US insurance industry’s most complete source of
historical personal automobile claims data.
Using HPCC Systems has improved the ability of
LexisNexis to provide a complete history of a potential
policyholder’s claim experience. HPCC Systems
enables us to discover claims even when given minimal
search criteria by the insurance carrier.
AS A CONTRIBUTORY DATABASE, C.L.U.E.®
AUTO HAS PROVEN TO BE INVALUABLE TO
THE INSURANCE INDUSTRY BECAUSE OF
THE INSIGHTS IT PROVIDES DURING THE
UNDERWRITING PROCESS.
Victor Bayus
Vice President, Product Management,
LexisNexis Risk Solutions
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12
BUSINESS REVIEW
RELX Group
The Group operates across a number of market segments
MARKET SEGMENTS
SEGMENT POSITION
In Scientific, Technical & Medical markets, we provide information and tools to help customers improve
scientific and healthcare outcomes.
Global #1
In Risk & Business Information, we provide data, analytics and insight that enable customers to evaluate
and manage risks, and develop market intelligence, supporting more confident decisions, improved
economic outcomes, and enhanced operational efficiency.
Key verticals #1
In Legal markets, we are a world-leading provider of legal, regulatory and news and business information
and analysis to legal, corporate, government and academic customers.
US #2
Outside US #1 or 2
In Exhibitions, we are the world’s leading events business, with 500 events in over 30 countries.
Global #1
Financial summary by market segment
Revenue
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Adjusted operating profit
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Unallocated items
2014
£m
2,048
1,439
1,396
890
5,773
762
506
260
217
(6)
1,739
2013
£m
2,126
1,480
1,567
862
6,035
787
507
250
210
(5)
1,749
Change
Change at constant
currencies
Change
underlying
–4%
–3%
–11%
+3%
–4%
–3%
0%
+4%
+3%
–1%
+1%
+2%
–6%
+11%
+1%
+1%
+5%
+10%
+12%
+5%
+2%
+6%
+1%
+7%*
+3%*
+3%
+6%
+6%
+9%
+5%
* Excluding exhibition cycling effects. Had cycling effects been included the Group’s underlying growth would have been 4% and Exhibitions’ would have been 9%.
Adjusted and underlying figures are additional performance measures used by management. Adjusted figures are reconciled to the reported figures in note 10 to the combined financial
statements and note 9 to the respective parent company financial statements. 2013 comparative financial information has been restated following the adoption of a new method for the
allocation of corporate and shared costs from 1 January 2014. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals
made in both the year and prior year and assets held for sale. Underlying revenue growth rates also exclude the effects of exhibition cycling. Constant currency growth rates are based
on 2013 full year average and hedge exchange rates. The underlying growth in revenue and in adjusted operating profit are the key performance indicators used by the Group in
assessing performance.
REVENUE
£5,773m
15%
36%
24%
Scientific,
Technical
& Medical
Risk & Business
Information
Legal
Exhibitions
ADJUSTED OPERATING PROFIT
£1,739m
12%
15%
25%
29%
Scientific,
Technical
& Medical
44%
Risk & Business
Information
Legal
Exhibitions
94118_Reed_AR_p007-036.indd 12
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RELX Group Annual Reports and Financial Statements 2014
Market
segments
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14BUSINESS REVIEWSCIENTIFIC, TECHNICAL & MEDICALIn Scientific, Technical & Medical markets, we provide information and tools to help customers improve scientific and healthcare outcomes.Elsevier is the world’s leading provider of scientific, technical & medical information serving scientists, health professionals and students worldwide. Its objective is to help its customers advance science and improve healthcare by providing world-class content and innovative information solutions that enable them to make critical decisions, enhance productivity, and improve outcomes.Revenues for the year ended 31 December 2014 were £2,048m. Elsevier is a global business with principal operations in Amsterdam, Beijing, Boston, Chennai, Delhi, London, Madrid, Munich, New York, Oxford, Paris, Philadelphia, Rio de Janeiro, St. Louis, San Diego, Singapore and Tokyo. It has 7,000 employees.Approximately 37% of revenue by destination in 2014 was derived from North America, 30% from Europe and the remaining 33% from the rest of the world.Elsevier serves the needs of the science, technology & medical markets by publishing primary research, reference and education content, as well as by providing a range of database and workflow solutions. Elsevier’s customers are scientists, academic institutions, educators, research leaders and administrators, medical researchers, doctors, nurses, allied health professionals and students, as well as hospitals, research institutions, health insurers, managed healthcare organisations, research-intensive corporations, and governments. All of these customers rely on Elsevier to provide high-quality content and critical information for making scientific and medical decisions; to review, publish, disseminate and preserve research findings; to create innovative tools to help focus research strategies, increase research effectiveness, improve medical outcomes, and enhance the efficiency of healthcare and healthcare education.In the primary research market during 2014, over 1.1m research papers were submitted to Elsevier. Over 16,000 editors managed the peer review and selection of these papers, resulting in the publication of more than 360,000 articles in over 2,000 journals, many of which are the foremost publications in their field and a primary point of reference for new research. This content was accessed by around 12m people, with more than 750m full text article downloads last year. Content is provided free or at very low cost in most of the world’s poorest countries. Elsevier’s journals are primarily published and delivered through the ScienceDirect platform, the world’s largest database of scientific and medical research, hosting over 12m pieces of content, and 30,000 e-books. Flagship journals include Cell and The Lancet families of titles.In 2014, Elsevier expanded the Lancet collection, adding new titles, such as The Lancet Psychiatry, The Lancet HIV and The Lancet Haematology. Elsevier is also a global leader in the scientific, technical & medical reference market, providing authoritative and current professional reference content. While reference has traditionally been provided in print, Elsevier has been a leader in driving the shift from print to electronic. Flagship titles include works such as Gray’s Anatomy, Nelson’s Pediatrics and Netter’s Atlas of Human Anatomy.Combines leading reference and evidence-based medical content into its fully integrated clinical insight engineAn innovative research management and social collaboration platformThe leading suite of preparation, testing and remediation resources that generate actionable data to prepare nursing and health profession students for success in pursuing degrees, passing licensure exams and starting their careersOne of the world’s leading medical journals since 1823The world’s largest database of scientific and medical research articlesScientific, Technical & Medical Premier life sciences journal with the highest impact factor in biochemistry and molecular biologyProvides research performance tools for academic institutions and funding intelligenceReady-to-use tools to analyse the world of research, and establish, execute and evaluate the best strategies for research organisations94118_Reed_AR_p007-036.indd 1410/03/2015 10:05 RELX Group Annual Reports and Financial Statements 2014
15
Elsevier’s flagship clinical reference platform, ClinicalKey,
provides physicians with access to leading Elsevier and
third-party reference and evidence-based medical content in a
single, fully integrated site. ClinicalKey is continuing to grow
strongly, and is currently accessed by over 2,000 institutions.
In medical education, Elsevier serves students of medicine, nursing
and allied health professions through print and electronic books, as
well as electronic solutions. For example, HESI, an online testing
and remediation solution designed to help students of nursing and
allied health professions, conducted over 700,000 tests in 2014.
Elsevier’s database and workflow products provide a range of tools
and solutions for professionals in the scientific, technical and
medical fields. Customers include academic and corporate
researchers, research administrators and healthcare professionals.
For academic and corporate researchers, significant products
include Scopus, Reaxys and Knovel. Scopus is the largest abstract
and citation database of research literature in the world, with over
56m abstract and bibliographic information records from more
than 21,000 peer-reviewed journals and 5,000 international
publishers. Reaxys is a leading solution for synthetic chemists,
integrating chemical reaction and compound data searching with
synthesis planning. Knovel provides a range of web-based
productivity tools for the engineering community, integrating
technical information with analytics and search to deliver trusted
answers and drive innovation.
Elsevier serves academic and government research administrators
through its Elsevier Research Intelligence suite of products.
Leveraging bibliometric data from Scopus and other data types,
SciVal helps institutions to establish, execute and evaluate
research strategies. Pure is a comprehensive research information
management system which enables evidence-based research
management decisions, promotes collaboration, simplifies
administration and optimises impact. Our Analytical Services team
provides accurate, unbiased analysis on research performance by
combining high-quality data sources with technical and research
metrics expertise. SciVal Funding assists researchers and
institutions in identifying grants that are most relevant in their
research areas.
For healthcare professionals, Elsevier develops products to
deliver patient-specific solutions at the point of care to improve
patient outcomes. Its clinical solutions include ExitCare which
provides patient education and discharge information and
CPM Resource Center, which provides a data-driven framework
to support nurses in undertaking procedures.
Market opportunities
Scientific, technical & medical information markets have good
long-term growth characteristics. The importance of research
and development to economic performance and competitive
positioning is well understood by governments, academic
institutions and corporations. This is reflected in the long-term
growth in research and development spend and in the number of
researchers worldwide. Growth in health markets is driven by
ageing populations in developed markets, rising prosperity in
developing markets and the increasing focus on improving
medical outcomes and efficiency. Given that a significant
proportion of scientific research and healthcare is funded directly
or indirectly by governments, spending is influenced by
governmental budgetary considerations. The commitment to
research and health provision does, however, remain high, even in
more difficult budgetary environments.
Strategic priorities
Elsevier’s strategic goal is to lead the way in providing information
solutions that advance science, technology and health. To achieve
this, Elsevier creates solutions that reflect deep insight into the
way its users work and the outcomes they are seeking to achieve;
strives for excellence in content, service and execution; constantly
adapts and revitalises its products, business models and
technology; and leverages its institutional skills, assets and
resources to promote innovation and efficiency.
Elsevier’s strategic priorities are to continue to increase content
volume and quality; to expand content coverage, building out
integrated solutions combining Elsevier, third-party and customer
data; to increase content utility, using “Smart Content” to enable
new e-solutions; to combine content with analytics and
technology, focused on measurably improving productivity and
outcomes for customers; and to continue to drive operational
efficiency and effectiveness.
In the primary research market, Elsevier aims to grow volume
through new journal launches, expansion of author-pays journals
and growth from emerging markets; to enhance quality by
building on our premium brands; and to add value to core
platforms by implementing new capabilities such as advanced
recommendations on ScienceDirect and social collaboration
through Mendeley.
In clinical reference markets, priorities are to expand content
coverage, including licensing high-quality third-party content for
ClinicalKey, as well as ensuring consistent tagging to link content
assets across products.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
£2,048m
£2,048m
Print
25%
Face-to-face
1%
Electronic
74%
Rest of World
33%
North America
37%
Europe 30%
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16
BUSINESS REVIEW
SCIENTIFIC, TECHNICAL & MEDICAL
Business model, distribution channels and competition
Science and medical research is principally disseminated on a
paid subscription basis to the research facilities of academic
institutions, government and corporations, and, in the case of
medical and healthcare journals, also to individual practitioners
and medical society members. For a number of journals,
advertising and promotional income represents a small
proportion of revenues predominantly from pharmaceutical
companies in healthcare titles.
Over the past 15 years alternative payment models for the
dissemination of research such as “author-pays” or “author’s-
funder-pays” have emerged. While it is expected that paid
subscription will remain the primary distribution model, Elsevier
has long invested in alternative business models to address the
needs of customers and researchers. Over 1,600 of Elsevier’s
journals now offer the option of funding research publishing and
distribution via a sponsored article fee. In addition, Elsevier now
publishes more than 100 open access journals.
Electronic products, such as ScienceDirect, Scopus and
ClinicalKey, are generally sold direct to customers through a
dedicated sales force that has offices around the world.
Subscription agents facilitate the sales and administrative
process for print journals. Books are sold through traditional and
online book stores, wholesalers and, particularly in medical and
healthcare markets, directly to end users.
Competition within science and medical publishing is generally on
a title-by-title and product-by-product basis. Competing journals,
books and databases are typically published by learned societies
and other professional publishers. Workflow tools face similar
competition, as well as from software companies and internal
solutions developed by customers.
GROWTH IN FULL TEXT ARTICLE DOWNLOADS
GROWTH IN SUBSCRIPTION JOURNAL ARTICLE SUBMISSIONS
+10%
+10%
2013
2014
2013
2014
94118_Reed_AR_p007-036.indd 16
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RELX Group Annual Reports and Financial Statements 2014
17
2014 financial performance
Revenue
Adjusted operating profit
2014
£m
2,048
762
2013
£m
2,126
787
Change
–4%
–3%
Change at constant
currencies
+1%
+1%
Change
underlying
+2%
+3%
Key business trends were positive for the year with underlying
research subscription revenue growth around half a percentage
point ahead of the prior year. Electronic revenues, which now
account for around 74% of the total, continued to see good
growth across segments.
The volume of “author-pays” or “author’s-funder-pays” articles
grew strongly from a small base. We continued to launch new
journals, and now operate over 100 stand-alone author-pays open
access journals alongside our sponsored article option in over
1,600 subscription journals.
Underlying revenue growth was +2% and underlying adjusted
operating profit growth was +3%. The difference between the
reported and underlying growth rates primarily reflects the
impact of exchange rate movements.
We saw continued good growth in databases and tools, as well as
in electronic reference and education.
Print book and pharma promotion revenues continued to decline,
albeit at a slightly lower rate than in the prior year.
In primary research, article submissions to subscription journals
and usage continued to grow in double digits, and journal quality,
as measured by relative impact factor, was maintained.
Subscription revenue growth rates were around half a percentage
point higher than in the prior year, driven by increased volume and
new sales.
2015 outlook
Our customer environment remains largely unchanged, with last
year’s trends continuing into 2015. Overall we expect another year
of modest underlying revenue growth
REVENUE
£m
Underlying growth +2%
2,126
2,048
ADJUSTED OPERATING PROFIT
£m
Underlying growth +3%
787
762
2013
2014
2013
2014
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18
BUSINESS REVIEW
SCIENTIFIC, TECHNICAL & MEDICAL
CLINICAL SOLUTIONS:
TRANSFORMING CLINICAL
PRACTICE TO IMPROVE
PATIENT CARE
More than six years ago, The North Shore-Long Island
Jewish Health System (NSLIJHS), one of the largest
health systems in the US, began a major strategic
effort to implement an electronic health record across
its multi-hospital enterprise. NHLIJHS sought to
“advance clinical practice and use technology to
integrate it”.
NSLIJHS partnered with Elsevier to equip every care
provider with the clinical information and systems
support needed to provide superior integrated,
interdisciplinary care. With the help of Elsevier’s CPM
Transformation Services, NSLIJHS embedded CPM’s
patient-centred care planning and clinical
documentation framework into its various electronic
health records across a majority of its 18 hospitals in
the New York metro region.
CPM Transformation Services enabled NSLIJHS to
create a high-quality, transparent, patient-centred
care culture, which contributed to it receiving the 2010
National Quality Healthcare Award from the National
Quality Forum and the 2013 Human Resource
Management Impact Award from the Society for
Industrial and Organizational Psychology and the
Society for Human Resource Management.
NSLIJHS also utilises Elsevier’s ClinicalKey, ExitCare
and Revenue Cycle eLearning – all elements of Elsevier’s
integrated suite of clinical information solutions.
WE MADE IT CLEAR FROM THE
BEGINNING THAT OUR PRIMARY
FOCUS WAS ABOUT THE PATIENT
AND ADVANCING PRACTICE. OUR
PARTNERSHIP WITH ELSEVIER HAS
BEEN CRITICAL TO INFORMING OUR
CARE MODEL AND CREATING AN
EVIDENCE-BASED STANDARD ACROSS
ALL CLINICAL SETTINGS SO THAT OUR
CLINICIANS CAN IMPROVE OUTCOMES
FOR OUR PATIENTS.
Maureen White
RN, MBA, NEA-BC, FAAN
Senior Vice President,
Chief Nurse Executive
Syosset Hospital Pain Management team with the prestigious
Press Gainey award for customer service
94118_Reed_AR_p007-036.indd 18
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RELX Group Annual Reports and Financial Statements 2014
19
85–95%
AVERAGE PERCENTAGE THAT
ELSEVIER CUSTOMERS WITH
THE CPM FRAMEWORK
OUTPERFORM US CARE
MEASURES. THIS INCLUDES
SUCCESS IN TREATING
CONDITIONS SUCH AS HEART
FAILURE AND PNEUMONIA.
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20
BUSINESS REVIEW
RISK & BUSINESS INFORMATION
Risk & Business Information
In Risk & Business Information,
we provide data, analytics and
insight that enable customers
to evaluate and manage risk.
We develop market intelligence,
supporting more confident
decisions, improving economic
outcomes, and enhancing
operational efficiency.
From 2014 Risk Solutions and Business Information have been
combined into one business area. This union brings together
LexisNexis Risk Solutions’ proprietary, public and third-party
information, advanced technology and analytics, with Reed
Business Information’s high-value industry critical data services,
information and tools as well as conferences, websites and
business magazines.
Revenues for the year ended 31 December 2014 were £1,439m.
Risk & Business Information has principal operations in Georgia,
Florida, Illinois and Ohio in the US and London, Amsterdam and
Shanghai. Risk & Business Information has 7,400 employees.
Approximately 73% of revenue in 2014 came from North America,
22% from Europe and 5% from the rest of the world.
Risk & Business Information is organised around market-facing
industry/sector groups including insurance, business services,
government, healthcare, major data services (including banking,
energy and chemicals, human resources) and other leading
brands. The largest of these sector groups is insurance.
The identity management and risk evaluation solutions provided
by Insurance Solutions, Business Services, Government Solutions
and Health Care Solutions utilise comprehensive database
platforms of public records and proprietary information with more
than two petabytes of unique data, which makes it the largest
database of its kind in the US market today. Our market-leading
technology enables Risk & Business Information to provide its
customers with highly relevant search results swiftly and to create
new, low-cost solutions quickly and efficiently. It is also
increasingly used across other Group business areas such as
Legal and Scientific, Technical & Medical.
Risk & Business Information is focused on developing a pipeline of
new solutions to drive growth in existing business segments and
selected adjacent markets and geographies.
Insurance Solutions provides a comprehensive combination of
data and analytics to personal, commercial and life insurance
carriers in the US to improve critical aspects of their business,
from customer acquisition and underwriting to claims handling.
Information solutions, including the most comprehensive US
personal loss history database, C.L.U.E.®, help insurers assess
risks and provide important inputs to pricing and underwriting
insurance policies. Additional key products include LexisNexis®
Data Prefill, which provides critical information on customers,
potential customers and their auto, property and life policy
information directly into the insurance workflow, and LexisNexis®
Current Carrier, which identifies current or previous insurance
coverage details as well as any lapses in coverage. Insurance
Solutions released new driving behaviour products in four states
in 2014. These products aggregate court data within specific
states to provide insurers with vital traffic violation information for
use in underwriting. In the UK, Insurance Solutions’ contributory
No Claims Discount (NCD) module, which automates verification
of consumers’ claims history, has achieved data contribution from
over 55% of the UK auto insurance sector in just over a year.
LexisNexis®
Identity Management
Range of solutions to help clients verify that
an identity exists and authenticate individuals
C.L.U.E.®
Most comprehensive US personal insurance
claims database
Data, news and advisory services for
professionals working in the global
aviation industry
LexisNexis® Data Prefill
Tool to automate insurance application
process providing critical information
insurers need to quote and underwrite a policy
LexisNexis® Revenue
Recovery and Discovery
Suite of tools to enable governments to
leverage public records and analytics to
identify instances of fraud and to more
efficiently collect on outstanding debts
Payment efficiency solutions, AML and
KYC services and compliance tools for the
banking and corporate sectors worldwide
Global provider of news, price benchmarks,
data, analytics and research to the energy,
chemical and fertiliser industries
LexisNexis® Anti-Money
Laundering Solutions
Content and information for anti-money
laundering compliance, risk mitigation
and enhanced due diligence
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RELX Group Annual Reports and Financial Statements 2014
21
In the Insurance business, Risk & Business Information acquired
four businesses during 2014. Wunelli is an industry-leading
telematics data services company based in the United Kingdom.
The combined LexisNexis and Wunelli data sets will result in one
of the largest provider-held insurance telematics databases in the
world, with solutions to support insurers as they assess risk and
discount safer drivers. Risk & Business Information also acquired
three US-based businesses to enhance the LexisNexis eCrash
solution. iyeTek is an innovative provider of mobile and handheld
software solutions, enabling public safety agencies to save time
and money and improve services provided to their communities.
PoliceReports.US is an online distributor of vehicle accident
reports currently in use by 29 states and Coplogic is a leading
provider of citizen self-reporting software solutions to law
enforcement agencies. In October, a joint venture was signed
with Jing You to supply data into the fast-growing auto insurance
market in China.
Business Services provides financial institutions with risk
management, identity management, fraud detection, credit risk
management, and compliance solutions. These include Know Your
Customer and Anti-Money Laundering products. The business
also provides risk and identity management solutions for
corporate customers in retail, telecommunications and utilities
sectors. Receivables management solutions help debt recovery
professionals in the segmentation, management and collection
of consumer and business debt. In 2014, the group substantially
advanced its international strategy, with the expansion of its
international sales force, launch of a simplified Chinese
language version of Bridger Insight® XG, a Bank Secrecy Act and
Anti-Money Laundering solution, and the ongoing upgrade of
the WorldCompliance heightened risk individuals database.
In Business Services, Risk & Business Information acquired
Tracesmart, a United Kingdom-based provider of tracing, identity
verification, fraud prevention, anti-money laundering, debt
collection and data cleansing solutions. Tracesmart, a leader in
identity management and fraud solutions in the UK, is a natural
complement to Risk & Business Information’s core competencies
and brings a robust set of UK public records, allowing Risk &
Business Information to extend its capabilities beyond the US in
order to serve its customers more fully.
Government Solutions provides data and analytics to US federal,
state and local law enforcement and government agencies to help
solve criminal and intelligence cases and to identify fraud, waste
and abuse in government programmes. The group’s Tax Refund
Investigative Solution (TRIS), now sold into eight states and the
District of Columbia, continues to generate substantial benefits
for both clients and taxpayers, with results to date of over $100m
in avoided fraud losses.
Health Care Solutions provides identity, fraud and clinical
analytics solutions across key stages of the healthcare workflow
to enable intelligent decision making for payers and providers.
During the year, the acquisition of Health Market Science, a leading
supplier of high-quality data on healthcare professionals and an
administrator of one of the largest practitioner-level medical claim
databases in the US, was completed.
The business also provides risk-related information to the legal
industry through LexisNexis Legal & Professional.
Outside of these areas, Risk & Business Information provides
information and online data services to business professionals
worldwide, with high-value industry critical data services,
information and tools as well as producing conferences, websites
and business magazines. It has many strong global brands with
market-leading positions across a wide range of industry sectors.
Data Services include: ICIS, an information and data service in
chemicals, energy and fertiliser; Accuity, a provider of services
and solutions to the banking and corporate sectors focused on
payment efficiency, Know Your Customer, Anti-Money Laundering
and compliance; and XpertHR, an online service providing
regulatory guidance, best practices and tools for HR
professionals. During the year, Accuity completed the acquisition
of FircoSoft, a leading provider of watch list filtering solutions for
financial institutions and corporates. Accuity also launched risk
solutions for customers in trade finance.
Leading Brands include Flightglobal, Farmers Weekly, Boerderij,
Fiscaal Totaal, Estates Gazette, Elsevier and New Scientist and
deliver a mix of high-quality data, workflow tools and high-value
news, information and opinion to business professionals across
many industry sectors while also providing an effective marketing
channel for customers. During the year Flightglobal completed
the acquisition of Innovata, a provider of global airline schedule
data. Risk & Business Information also acquired Farmade,
a UK-based supplier of crop recording, mapping and precision
farming workflow tools.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHY
£1,439m
Print 12%
Face to face
3%
£1,439m
Rest of World
5%
Europe
22%
Electronic
85%
North
America
73%
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22
BUSINESS REVIEW
RISK & BUSINESS INFORMATION
In 2014, Risk & Business Information continued to reshape its
portfolio, exiting areas not core to its strategy. As part of this
strategy, 51% of Reed Construction Data (RCD), a provider of
online construction data and information to the construction
industry was divested, and 100% of RS Means, a construction
costing service which had previously been a division of RCD.
Risk & Business Information also completed its exit from its
Marketing Solutions businesses, including the sales of BuyerZone
and emedia and one divestment of a portfolio of B2B assets from
its Netherlands operation is now also completed.
Market opportunities
Risk & Business Information operates in markets with strong
long-term underlying growth drivers with growing demand for
high-quality industry data and information and insight including:
insurance underwriting transactions; insurance, healthcare,
tax and entitlement fraud; credit defaults and financial fraud;
regulatory compliance and due diligence requirements
surrounding customer enrolment; security and privacy
considerations; and data and analytics for the banking, energy
and chemicals, human resources and aviation sectors.
In the insurance segment, growth is supported by increasing
transactional activity in the auto, property and life insurance
markets and the increasing adoption by insurance carriers of more
sophisticated data and analytics in the prospecting, underwriting
and claims evaluation processes, to assess underwriting risk,
increase competitiveness and improve operating cost efficiency.
Transactional activity is driven by growth in insurance quoting and
policy switching, as consumers seek better policy terms. This
activity is stimulated by competition among insurance companies,
high levels of carrier advertising, and rising levels of internet
quoting and policy binding.
A number of factors support growth in banking and financial
services markets, including cross-border payments and trade
finance levels, new credit originations, continued high fraud
losses, stringent regulatory compliance requirements, and
increasing anti-money laundering fines. In receivables
management, demand is driven mainly by levels of consumer debt
and the prospect of recovering that debt, which is impacted by
employment conditions in the US. In corporate markets, demand
is supported by growth in online retail sales and continued high
levels of credit card fraud. Growth in government markets is
driven by the increasing use of data and analytics to combat
criminal activity, fraud and tax evasion, and to address security
issues. The level and timing of demand in this market is influenced
by government funding and revenue considerations. In Health
Care, there are numerous growth drivers for fraud and analytics
solutions including the expansion of insurance coverage under the
Affordable Care Act and the focus on cost containment and better
patient outcomes.
Growth in the global energy and chemicals markets is driven by
increasing trade and demand for more sophisticated information
solutions. Risk & Business Information’s aviation information
markets are being driven by increases in air traffic and in the
number of aircraft transactions.
Strategic priorities
Risk & Business Information’s strategic goal is to help businesses
and government achieve better outcomes with information and
decision support in its individual markets through better
understanding of risks associated with individuals, other
businesses and transactions. By providing the highest quality
industry data and tools, we assist customers in understanding their
markets and managing risks efficiently and cost effectively. To
achieve this, Risk & Business Information is focused on: delivering
innovative new products across customer workflows; expanding
the range of risk management solutions across adjacent markets;
addressing international opportunities in selected markets to
meet local needs; further growing its data services businesses,
and continuing to strengthen its content, technology and
analytical capabilities.
GROWTH IN PROVIDER DATA RECORDS
GROWTH IN FLIGHTGLOBAL DATABASE
35%
13%
2013
2014
2013
2014
Growth in Provider Data Records processed by Healthcare customers
driven by increased demand for cost, quality and compliance solutions.
Flightglobal holds a database of 156,000 minimum connection times
between flights at all of the world’s major airports.
94118_Reed_AR_p007-036.indd 22
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RELX Group Annual Reports and Financial Statements 2014
23
Business model, distribution channels and competition
Risk & Business Information’s products in Insurance, Business
Services and Government are for the most part sold directly,
with pricing predominantly on a transactional basis for insurance
carriers and corporations, and primarily on a subscription basis
for government entities.
Data services are typically sold directly on a subscription or
transactional basis. Business magazines are mainly distributed
on a paid basis. Advertising revenues are sold directly.
which in many cases address different activities in these segments
as well.
Risk & Business Information’s data services and leading brands
compete with a number of information providers on a service
and title-by-title basis including: Platts, Thomson Reuters, IHS
and Wolters Kluwer as well as many niche and privately owned
competitors. Risk & Business Information competes for online
advertising with other business-to-business websites, search
engines and social media.
Risk & Business Information and Verisk, a competitor, each sell
data and analytics solutions to insurance carriers but largely
address different activities. Risk & Business Information’s
principal competitors in business services and government
segments include Thomson Reuters and major credit bureaus,
Across Risk & Business Information, user and subscription
revenues now account for 94% of the total business with
the remaining 6% derived from print and online advertising.
Electronic revenue streams now account for 85% of
total revenue.
2014 financial performance
Revenue
Adjusted operating profit
2014
£m
1,439
506
2013
£m
1,480
507
Change
–3%
0%
Change at constant
currencies
+2%
+5%
Change
underlying
+6%
+6%
Strong underlying revenue growth was driven by volume
growth, new product roll-outs and expansion in adjacent
segments. Underlying profit growth broadly matched revenue
growth reflecting ongoing organic initiatives.
Underlying revenue growth was +6% and underlying adjusted
operating profit growth was +6%. The difference between the
reported and underlying growth rates reflects the impact of
exchange rate movements and portfolio changes.
Strong growth in the insurance segment was driven by solid
demand for the US auto underwriting business, good take up of
new products and services across the insurance workflow, and
expansion in adjacent market verticals. The international
initiatives are progressing well.
In Business Services, growth was driven by demand for identity
authentication and fraud detection solutions, particularly in the
financial services sector.
In Government, the state and local segment continued to achieve
strong growth. Federal government revenue trends improved
during the year.
Major Data Services maintained strong underlying revenue
growth, driven by Accuity, XpertHR and ICIS, and other magazines
and services were stable.
In 2014 we continued to support organic growth through the
acquisition of data and analytics assets. In 2014 we completed the
acquisition of Innovata, a provider of airline schedule data,
Tracesmart, a provider of UK public records, Wunelli, a provider
of telematics solutions for the auto industry, FircoSoft, a provider
of anti-money laundering solutions for the financial services
industry, and Health Market Science, a supplier of high-quality
data on healthcare professionals.
We also exited assets that no longer fit our strategy, including
the disposal of several magazines and the spin-off of certain
construction industry assets.
2015 outlook
The fundamental growth drivers of Risk & Business Information
remain strong. We expect underlying revenue growth trends to
continue in 2015.
REVENUE
£m
Underlying growth +6%
1,480
1,439
ADJUSTED OPERATING PROFIT
£m
Underlying growth +6%
507
506
2013
2014
2013
2014
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24
24
BUSINESS REVIEW
BUSINESS REVIEW
RISK & BUSINESS INFORMATION
REED ELSEVIER
LEXISNEXIS
RISK SOLUTIONS:
SAVING LIVES ONE
TRAFFIC INCIDENT
AT A TIME
BY INTERACTING WITH THE PUBLIC MORE EFFICIENTLY,
WE ARE ABLE TO FREE UP MANPOWER AND ASSIGN
OFFICERS TO POSITIONS THAT ARE BETTER FOR THE
DEPARTMENT AND OUR COMMUNITY. THE IMPROVEMENT
IN THE EFFICIENCY OF THE SYSTEM HAS A POSITIVE
IMPACT FOR THE AGENCY AS WE ARE CHALLENGED
WITH LIMITED RESOURCES.
Pete Kassetas
Chief of Police,
New Mexico State Police
More police officers in the US are killed in
traffic accidents than are killed by guns.
LexisNexis and New Mexico State Police
are reducing the toll with a revolutionary
electronic application, eCrash.
In 2012, New Mexico was one of the first
state police agencies to minimise the
manual administrative process associated
with accident reporting and fulfilment.
By auto-filling information, clearing roads
more quickly and sharing reports
automatically with state agencies, officers
can get back to patrolling the streets and
better serving their communities. eCrash
can reduce the average time it takes an
officer to write a report from 60 minutes
down to only 19 minutes. This reduces the
time spent in a potentially dangerous
environment by 41 minutes.
From all the information gathered
electronically, officers can use eCrash
provided analytics to evaluate when,
where and why accidents occur, further
improving traffic safety, reducing injuries
and fatalities.
2,000+
LAW ENFORCEMENT
AGENCIES USING
ECRASH IN THE US
41
minutes
TIME SAVED BY
USING ECRASH
Police officer recording road accident
94118_Reed_AR_p007-036.indd 24
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RELX Group Annual Reports and Financial Statements 2014
25
ACCUITY:
ENSURING AN EFFICIENT,
COMPLIANT AND COST-
EFFECTIVE SOLUTION TO
PAYMENT PROCESSING
The Ecobank Group is a full-service bank
with operations in 36 countries across
Africa. It provides wholesale, retail,
investment and transactional banking
services to governments, financial
institutions, multinationals, local
companies, small and medium
enterprises, and individuals.
Ecobank needs to ensure its transactions
are fast and accurate and it uses Accuity’s
Global Payment file to achieve this.
Accuity provides solutions to banks and
businesses worldwide. Its unmatched data
and services deliver optimal payment
efficiency, compliant transactions, bank
counterparty insight and anti-money
laundering screening success.
Accuity’s global data ensures that the
payments process for companies
like Ecobank are efficient, compliant
and cost effective.
ACCUITY’S INTEGRATED DATA LINKS
INTO OUR CORE BANKING SYSTEMS.
THIS MEANS THAT WE CAN PROCESS
HUNDREDS OF THOUSANDS OF
PAYMENTS ACCURATELY, QUICKLY
AND EFFICIENTLY USING THE MOST
UP-TO-DATE AND TRUSTED BANKING
DATA OUT THERE.
Victor Oyango
Group Manager, Cash
Management Operations,
Ecobank
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26
BUSINESS REVIEW
LEGAL
Legal
In Legal markets, we are a world-
leading provider of legal,
regulatory, and news and business
information and analysis to law
firm, corporate, government and
academic customers.
Serving customers in more than 175 countries, LexisNexis Legal
& Professional provides resources and services that inform
decisions, increase productivity and drive new business.
Revenues for the year ended 31 December 2014 were £1,396m.
LexisNexis Legal & Professional is headquartered in New York
and has principal operations in the New York area, Ohio and North
Carolina in the US, Toronto in Canada, London and Paris in Europe,
and cities in several other countries in Africa and Asia Pacific.
It has 9,500 employees worldwide. Approximately 66% of revenue
by destination in 2014 was derived from North America, 23% from
Europe and the remaining 11% from the rest of the world.
LexisNexis Legal & Professional is organised in market-facing
groups. These are supported by global shared services
organisations providing platform and product development,
operational and distribution services, and other support functions.
In North America, electronic information solutions and innovative
workflow tools from Research Solutions help legal and business
professionals make better informed decisions in the practice of
law and in managing their businesses. Flagship products for legal
research are Lexis.com and Lexis Advance, which provide federal
and state statutes and case law, together with analysis and expert
commentaries from sources such as Matthew Bender and Michie
and the leading citation service Shepard’s, which advises on the
continuing relevance of case law precedents. Research solutions
also include news and business information, ranging from daily
news to company filings, as well as public records information and
analytics. LexisNexis also partners with law schools to provide
services to students as part of their training.
In 2014, LexisNexis continued to release new versions of
Lexis Advance, an innovative web application designed to
transform how legal professionals conduct research. Built on
an advanced technology platform, Lexis Advance allows primary
researchers within legal and professional organisations to find
relevant information more easily and efficiently, helping to drive
better outcomes. Future releases will continue to expand content
and outreach and add new innovative tools. LexisNexis employs
lawyers and trained editors with professional legal backgrounds
who review, annotate and update the legal content to help ensure
each document in the collection is current and comprehensive.
This domain expertise combined with the application of the
Group’s big data HPCC technology means Lexis Nexis is able to
update its entire legal collection faster and more efficiently, while
also identifying and linking content, enabling customers to uncover
previously undiscovered relationships between documents.
LexisNexis® UK flagship legal online product
LexisNexis® UK legal practical
guidance service
Matthew Bender®
Critical analysis, checklists, forms and
practice guides authored by industry experts
covering over 50 major practice areas
Premier citations service
Leading legal news provider covering the
entire spectrum of practice areas every single
business day
Lexis®
New online legal research tool that
transforms the way legal professionals
conduct research
New resource that offers guidance to help
attorneys handle transactional matters more
efficiently and effectively
Unparalleled legal, news and public records
content for legal professionals
94118_Reed_AR_p007-036.indd 26
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RELX Group Annual Reports and Financial Statements 2014
27
New workflow and analytical tools and content sets are regularly
introduced on Lexis Advance. For example, in 2014 LexisNexis
launched LexisNexis Counsel Benchmarking, a new analytics
solution that works with Verdict & Settlement Analyzer to inform
litigation strategy decisions. Also, LexisNexis launched new
modules for Lexis Practice Advisor, a web-based practical guidance
product tailored for attorneys who handle transactional matters.
In the UK, LexisNexis is a leading legal information provider
offering an unrivalled collection of primary and secondary
legislation, case law, expert commentary, and forms and
precedents. Its extensive portfolio includes a number of heritage
brands: Halsbury’s, Tolleys and Butterworths. The content is
delivered through multiple formats – from print to online to
mobile apps and embedded in customers’ workflow.
LexisNexis Business & Litigation Software Solutions serves as
the software arm for the company. Its business of law software
provides law firms with practice management solutions, including
time and billing systems, case management, cost recovery and
document management services. Its litigation software provides
lawyers with a suite of tools covering case preparation to
processing and review to trial preparation. During 2014,
LexisNexis released multiple new versions for its existing portfolio
including CounselLink, PCLaw, Sanction and Firm Manager.
In international markets outside the US, LexisNexis serves legal,
corporate, government, accounting and academic markets in
Europe, Canada, Africa and Asia Pacific with local and
international legal, regulatory and business information.
The most significant businesses are in the UK, France,
Australia, Canada and South Africa.
LexisNexis focuses on providing customers with leading
collections of content and innovative online solutions to help
legal and business professionals make better decisions more
efficiently. Penetration of online information services has grown
strongly and electronic solutions now account for 63% of revenue
outside the US.
In 2014, LexisNexis launched additional modules for the UK
LexisPSL product suite which provides lawyers with a single
destination for their practical legal information needs with direct
links to the relevant cases, legislation, precedents, forms,
practical guidance and expert commentary.
In France, LexisNexis is a leading online provider of information to
lawyers, notaries and courts. A heritage brand JurisClasseur and
leading authoritative content is provided through multiple formats
– lexisnexis.fr, mobile and in print. These content sources are,
as in the UK, being combined with new content and innovative
workflow tools to develop practical guidance and practice
management solutions. In 2014, LexisNexis France continued to
enhance Lexis 360, the first semantic search online tool combining
legal information, practical content and results from the web
by providing tailored solutions for the public sector and the
accounting markets.
Additional practical guidance solutions were launched in Canada,
South Africa and Australia. Following the continued success of
Lexis Advance in the US, an Australian version was launched
in 2014 and additional international launches are planned.
In 2014, LexisNexis Legal & Professional strengthened its
positions in Asia by introducing products created specifically for
legal professionals and practitioners, corporate counsels, legal
researchers and government institutions in markets including
India, China and Japan. New practical guidance offerings are now
available in China, Hong Kong and Japan. Also, LexisNexis
continued its investment in broadening its core content offerings
in India, Singapore and other countries in the region.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
£1,396m
Print
22%
Face to face
1%
£1,396m
Rest of World
11%
Europe
23%
Electronic
77%
North America
66%
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28
BUSINESS REVIEW
LEGAL
Market opportunities
Longer-term growth in legal and regulatory markets worldwide is
driven by increasing levels of legislation, regulation, regulatory
complexity and litigation, and an increasing number of lawyers.
Additional market opportunities are presented by the increasing
demand for online information solutions and practice
management tools that improve the quality and productivity of
research, deliver better legal outcomes, and improve business
performance. Notwithstanding this, legal activity and legal
information markets are also influenced by economic conditions
and corporate activity, as has been seen with the dampening of
demand and the subdued environment in North America and
Europe in the aftermath of the global recession.
Strategic priorities
LexisNexis Legal & Professional’s strategic goal is to enable
better legal outcomes and be the leading provider of productivity-
enhancing information and information-based workflow solutions
in its markets. To achieve this LexisNexis is focused on introducing
next generation products and solutions on the global New Lexis
platform and infrastructure; leveraging New Lexis globally to
continue to drive print to electronic migration and long-term
international growth; and upgrading operational infrastructure,
improving process efficiency and gradually improving margins.
In the US, LexisNexis’ focus is on the continuing development of
next generation legal research and practice solutions. It is also
conducting a major upgrade in operations infrastructure and
customer service and support platforms. This will provide
customers with an integrated and superior experience across
multiple products and solutions. Over the next few years
progressive product introductions, often based on the New Lexis
platform, leveraging big data HPCC technology, will combine
advanced technology with enriched content, sophisticated
analytics and applications to enable LexisNexis’ customers to
make better legal decisions and drive better outcomes for their
organisations and clients.
Outside the US, LexisNexis is focused on growing online services
and developing further high-quality actionable content and
workflow tools, including the continuous development of practical
guidance and practice management applications. In 2015,
LexisNexis will continue to introduce New Lexis globally.
Additionally, LexisNexis is focusing on the expansion of its
activities in emerging markets.
Business model, distribution channels and competition
LexisNexis Legal & Professional products and services are
generally sold directly to law firms and to corporate, government,
accounting and academic customers on a paid subscription basis,
with subscriptions with law firms often under multi-year contracts.
Principal competitors for LexisNexis in US legal markets are
West (Thomson Reuters), CCH (Wolters Kluwer) and Bloomberg.
In news and business information they are Bloomberg and Factiva
(News Corporation). Competitors in litigation solutions also
include software companies. Significant international competitors
include Thomson Reuters, Wolters Kluwer and Factiva.
LEXIS ADVANCE CUSTOMER PENETRATION
MOBILE DOCUMENT ACCESSES
82%
73%
+54%
2013
2014
2013
2014
Increasing uptake of next generation legal platform.
Increasing use of Lexis Advance and lexis.com mobile content.
94118_Reed_AR_p007-036.indd 28
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RELX Group Annual Reports and Financial Statements 2014
29
2014 financial performance
Revenue
Adjusted operating profit
2014
£m
1,396
260
2013
£m
1,567
250
Change
–11%
+4%
Change at constant
currencies
–6%
+10%
Change
underlying
+1%
+6%
Underlying revenue trends remained unchanged in 2014, with
subdued market conditions in the US and Europe limiting overall
revenue growth. The improvement in profitability reflects a
combination of process innovation, infrastructure
decommissioning and portfolio reshaping.
Underlying revenue growth was +1% and underlying adjusted
operating profit growth was +6%. The difference between the
reported and underlying growth rates reflects the impact of
exchange rate movements and portfolio changes.
Electronic revenues, which now account for 77% of the total, saw
continued growth, partially offset by print declines.
US and European markets remained stable but subdued. In other
international markets we continued to see good growth.
The roll-out of new platform releases continued in 2014, and
adoption and usage rates for new products and solutions have
continued to progress well.
Around one percentage point of the 270 basis points of margin
improvement was achieved through organic process innovation
and infrastructure decommissioning, with the balance largely
reflecting portfolio changes.
2015 outlook
Trends in our major customer markets are unchanged, limiting
the scope for underlying revenue growth. We will maintain our
focus on process innovation, and expect further improvement in
profitability over the medium term, albeit at a modest rate in 2015
following the sharp margin increase in 2014.
REVENUE
£m
Underlying growth +1%
1,567
1,396
ADJUSTED OPERATING PROFIT
£m
Underlying growth +6%
250
260
2013
2014
2013
2014
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3030
BUSINESS REVIEW
LEGAL
LEXISNEXIS
DIGITAL LIBRARY:
LEGAL INSIGHTS,
ANYTIME ANYWHERE
Foley & Lardner, a full-service law firm with 20 offices
in the United States and across the globe, serves
clients in 49 distinct practice areas within 12 major
industry sectors. The firm, which is recognised for its
exceptional client service, combines extensive
resources with a local focus to deliver seamless
business and legal insight.
Foley implemented the LexisNexis Digital Library
solution to transform the management of its 40
disparate collections and services across geographies
to offer a better user experience and save staff time and
operating costs. By centralising its library collection
and services into one digital solution, Foley’s 850
attorneys now have one single, easy-to-use destination
to search and access titles. The eLending capabilities
extend to any device – computer, smartphone and
tablet. Digital library management and eLending helps
Foley’s library staff maximise content investments and
frees up administrative time so they can better support
their attorneys with value-added services.
LEXISNEXIS DIGITAL LIBRARY
HELPED US CENTRALISE OUR
COLLECTION AND ITS ACCESS
POINTS, ELIMINATE REDUNDANCIES
ACROSS OUR OFFICES, AND REDUCE
THE OVERALL RESOURCES NEEDED
TO SUPPORT OUR LIBRARY SYSTEM.
Jeffrey A. Bois
Director of Research &
Information Services,
Foley & Lardner
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RELX Group Annual Reports and Financial Statements 2014
31
About LexisNexis Digital Library
LexisNexis Digital Library provides
librarians with a user friendly, centralised
platform to order titles, supervise lending
of all electronic content, and manage their
collections—reducing storing, filing and
distribution costs. Built in collaboration
with Overdrive, its platform is based on
an open industry standard, allowing
other legal publishers such as the
American Bar Association to add their
content to the collection.
800,000
Titles
FROM MORE THAN 2,000
PUBLISHERS CAN BE
PURCHASED THROUGH
LEXISNEXIS DIGITAL LIBRARY.
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32
BUSINESS REVIEW
EXHIBITIONS
Exhibitions
We operate the world’s leading
exhibitions business, with 500
events in over 30 countries.
Reed Exhibitions’ portfolio of exhibitions and conferences serves
43 industry sectors across the globe. In 2014, Reed Exhibitions
brought together over 7m event participants from around the
world, generating billions of dollars of business and facilitating
entry into new markets for its customers and boosting the local
economies where the events are hosted.
Revenues for the year ended 31 December 2014 were £890m.
Reed Exhibitions is a global business headquartered in London
and has principal offices in Paris, Vienna, Norwalk (Connecticut),
São Paulo, Abu Dhabi, Beijing, Moscow, Tokyo and Sydney. Reed
Exhibitions has 3,700 employees worldwide. In 2014,
approximately 16% of Exhibitions’ revenue came from North
America, 47% from Europe and the remaining 37% from the rest
of the world on an event location basis.
Reed Exhibitions organises market-leading events which are
relevant to industry needs, where participants from around the
world meet face-to-face to do business, to network and to learn.
Its exhibitions and conferences encompass a wide range of
sectors. They include construction, cosmetics, electronics,
energy and alternative energy, engineering, entertainment, gifts
and jewellery, healthcare, hospitality, interior design, logistics,
manufacturing, pharmaceuticals, real estate, recreation,
security and safety, transport and travel.
Market opportunities
Growth in the exhibitions market is influenced by both business-to-
business marketing spend and business investment. Historically,
these have been driven by levels of corporate profitability, which
in turn has followed overall growth in GDP. Emerging markets and
higher growth sectors provide additional opportunities for Reed
Exhibitions. As some events are held other than annually, growth
in any one year is affected by the cycle of non-annual exhibitions.
Strategic priorities
Reed Exhibitions’ strategic goal is to understand and respond
to its customers’ evolving needs and objectives better than its
competition through deep knowledge of its customers and the
markets they serve.
Reed Exhibitions delivers a platform for industry communities
to conduct business, to network and to learn through a range of
market-leading events in growth sectors, especially in higher
growth geographies, enabling exhibitors to target and reach
new customers quickly and cost effectively.
Organic growth will be achieved by continuing to generate greater
customer value through the intelligent application of customer
knowledge, by developing new events, and by building out
technology platforms to ensure the rapid deployment of innovation
and best practices across the organisation. Reed Exhibitions is
also shaping its portfolio through a combination of strategic
partnerships and acquisitions in high-growth sectors and
geographies as well as by withdrawing from markets and
industries with lower long-term growth prospects.
Manufacturing World Tokyo – Japan’s largest
trade show for the manufacturing industry
Premier global event for the
travel industry
International contemporary art fair
The world’s property market
The North American jewellery industry’s
premier trade event
Asia’s sourcing and
Asia’s sourcing and networking platform
for the complete aluminium industry chain
International machinery trade fair
Pax Prime – Game festival for tabletop,
videogame and PC gamers
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RELX Group Annual Reports and Financial Statements 2014
33
Reed Exhibitions is committed to continuously improving
customer solutions and experience. By providing a variety of
services, including its integrated web platform, the company
continues to drive customer satisfaction. Using customer insights,
Reed Exhibitions has developed an innovative product offering
which enhances the value proposition for exhibitors by broadening
their options in terms of the type and location of stand they take
and the timing of their commitment to the event.
In 2014 Reed Exhibitions launched 36 new events. These included
many events which delivered on the strategy of taking sector
expertise, customer relationships and leading brands from one
market and extending them into new geographies using local
operational capability. Mipim, the leading property show held
annually in Cannes, responded to the buoyant UK property market
with the launch of an offshoot in London; FIBO China (health and
fitness) was launched in Shanghai, building on the successful and
long running German event FIBO; and in Singapore, Reed
Exhibitions launched an Asian version of Maison&Objet, the leading
design-led home and furniture show held twice a year in Paris.
A number of targeted acquisitions and investments were
completed during 2014. Increasing its holding in Reed Tüyap gave
Reed Exhibitions a strong position in Turkey, and with the
acquisition of Fidalex and AFG, Reed Exhibitions achieved market
leader status in Mexico. The Mexican acquisitions brought events
such as Expo Carga (transport and logistics) and the Beauty Show
into its portfolio. In addition, an investment in the Bakery event,
serving the bakery and confectionery industry, broadened its
footprint in China.
Business model, distribution channels and competition
The substantial majority of Reed Exhibitions’ revenues are from
sales of exhibition space. The balance includes conference fees,
online and offline advertising, sponsorship fees and, for some
shows, admission charges. Exhibition space is sold directly or
through local agents where applicable. Reed Exhibitions often
works in collaboration with trade associations, which use the
events to promote access for members to domestic and export
markets, and with governments, for whom events can provide
important support to stimulate foreign investment and promote
regional and national enterprise. Increasingly, Reed Exhibitions is
offering visitors and exhibitors the opportunity to interact before
and after the show through the use of online and mobile tools such
as directories and matchmaking.
Reed Exhibitions is the global market leader in a fragmented
industry, holding less than a 10% global market share. Other
international exhibition organisers include UBM, Informa IIR and
some of the larger German Messe, including Messe Frankfurt,
Messe Düsseldorf and Messe Munich. Competition also comes
from industry trade associations and convention centre and
exhibition hall owners.
NUMBER OF EVENT LAUNCHES
EVENTS IN EMERGING MARKETS
37
36
192
209
2013
2014
2013
2014
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET*
£890m
Electronic 3%
£890m
Rest of World
37%
Face-to-face
97%
*On an event location basis.
North America
16%
Europe
47%
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34
BUSINESS REVIEW
EXHIBITIONS
2014 financial performance
Revenue
Adjusted operating profit
2014
£m
890
217
2013
£m
862
210
Change
+3%
+3%
Change at constant
currencies
+11%
+12%
Change
underlying
+7%*
+9%
* Excluding exhibition cycling. Had cycling effects been included underlying growth would have been +9%.
Exhibitions achieved another year of strong underlying revenue
and profit growth, and continued to actively pursue growth
opportunities through new launches and small acquisitions.
Underlying revenue growth was +7% and underlying adjusted
operating profit growth was +9%. Had the effects of exhibition
cycling been included underlying revenue growth would have been
around two percentage points higher. The difference between the
reported and underlying growth rates primarily reflects the
impact of exchange rate movements.
The US and Japan achieved strong growth. In the US, growth
reflected strong demand across our broad portfolio of leading
events. Strong growth in Japan was driven by new launches and
strong demand across our major events.
Europe saw modest growth overall. Domestic markets remained
subdued, but international events in the UK and France achieved
good growth.
China continued to see strong growth in certain sectors, and
moderate growth elsewhere. Revenues in Brazil reflected good
growth in some of our leading events, but a slowdown in the wider
economy. Most other markets continued to grow strongly.
In 2014 we launched 36 new events and completed several small
acquisitions and joint venture investments, primarily in
high-growth geographies and sectors.
2015 outlook
We expect underlying revenue growth trends to continue, with
strong growth in the US and Japan and modest growth in Europe.
In other markets the outlook remains strong, albeit slightly below
the high levels achieved in recent years. In 2015 we expect cycling
out effects to reduce the overall revenue growth rate by three to
four percentage points.
REVENUE
£m
Underlying growth +7%
862
890
ADJUSTED OPERATING PROFIT
£m
Underlying growth +9%
210
217
2013
2014
2013
2014
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RELX Group Annual Reports and Financial Statements 2014
35
35
IN-COSMETICS:
AN AWARD-WINNING
GLOBAL BRAND
The leading global business platform for
the personal care ingredients industry,
in-cosmetics is an outstanding example of
Reed Exhibitions’ ability to leverage the
strength of its brands in new geographies.
From a single event in 1990, the
in-cosmetics brand has grown to
encompass four events across Europe,
Asia and Latin America, all delivering
access to the very latest cosmetic
ingredients and technologies, world-class
educational programmes and unrivalled
networking opportunities.
In April 2015 in-cosmetics celebrates its
25th anniversary in Barcelona, marking a
major milestone in the show’s history.
Staged each spring in a major European
city, the flagship global event has played a
dynamic role in helping to shape the
landscape of the personal care ingredients
industry as the annual launch pad for
new products, and set the standard for
in-cosmetics events around the world.
in-cosmetics Asia was launched in 2008 and
has quickly grown to become the largest
pan-Asian personal care ingredients event.
The first in-cosmetics Brazil took place in
São Paulo in September 2014 and in June
2015 in-cosmetics makes its debut in South
Korea, Asia’s third largest cosmetics
market. The combined portfolio has
achieved double digit revenue growth
year-on-year for the last five years.
Reflecting the strength of the brand,
in-cosmetics scooped two awards at the
AEO (Association of Exhibition Organisers)
Excellence Awards 2014, taking the top spot
for ‘Best Overseas Tradeshow Exhibition’
and ‘Best Tradeshow Exhibition Overall’.
90%
Visitor
satisfaction
THE SHOW HAS BEEN VERY SUCCESSFUL AND EXTREMELY
BUSY. IN-COSMETICS SETS THE INDUSTRY STANDARD
FOR OTHER EXHIBITIONS AND MOST OF OUR CUSTOMERS
HAVE BEEN HERE, BIG AND SMALL. IT’S A GOOD WAY
TO MEET PEOPLE FROM ALL OVER THE WORLD, NOT
JUST EUROPE BUT PEOPLE FROM COUNTRIES SUCH AS
BRAZIL AND CHINA. IN THREE DAYS YOU CAN MEET MORE
PEOPLE THAN YOU COULD IN SIX MONTHS OF TRAVELLING
AND THE INTERACTION IS BETTER FACE TO FACE.
Dr Thomas Satzinger
Director, Global Marketing,
Evonik Industries
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RELX Group Annual Reports and Financial Statements 2014
Reed Elsevier Annual Reports and Financial Statements 2014
37
37
Business review
Corporate
Dest que occusae vel
responsibility
ex explant vendae id
etur,
quo maximent, consed
mo temea commodita
similia tiatur simolor
The Corporate Responsibility Report is
an integral part of our Annual Reports
and Financial Statements. This section
highlights progress on our 2014 corporate
responsibility objectives. You can read the
full 2014 Corporate Responsibility Report at
www.relxgroup.com/go/CRReport
IN THIS SECTION
00 Elsevier
00 LexisNexis Risk Solutions
00 LexisNexis Legal & Professional
00 Reed Exhibitions
00 Reed Business Information
00 Corporate responsibility
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38
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
Corporate responsibility
Corporate responsibility ensures
good management of risks and
opportunities, helps us attract
and retain the best people, and
strengthens our corporate
reputation. It means performing
to the highest commercial and
ethical standards and channelling
our knowledge and strengths,
as global leaders in our industries,
to make a difference to society.
Consistent engagement with stakeholders, including
shareholders, employees, governments and communities where
we operate, helps us determine material corporate responsibility
issues. The Boards of Directors, senior management and the
Corporate Responsibility Forum oversee corresponding
objectives and monitor performance against them.
We concentrate on the contributions we make as a business
and on good management of the material areas that affect
all companies:
1. Our unique contributions
2. Governance
3. People
4. Customers
5. Community
6. Supply chain
7. Environment
1. Our unique contributions
We focus on areas where we can make a positive impact on society
through our unique knowledge, resources, and skills including
universal sustainable access to information, advance of science
and health, protection of society and promotion of the rule of law
and justice.
Scientific, Technical & Medical
Elsevier, the world’s leading provider of scientific, technical and
medical information, plays an important role in advancing human
welfare and economic progress through its science and health
information, which spurs innovation and enables critical decision
making. To broaden access to its content, Elsevier supports
programmes where resources are often scarce. Among them is
Research4Life, a partnership with United Nations agencies and
other publishers; we provide core and cutting-edge scientific
information to researchers in more than 100 developing countries.
As a founding partner, we contribute over a quarter of the material
available in Research4Life, encompassing all ScienceDirect
content, including more than 3,000 Elsevier journals and nearly
13,000 books. In 2014, there were more than 3.9m Research4Life
article downloads from ScienceDirect. In the year, Elsevier
collaborated with the World Bank to examine research trends
across Africa to help countries understand how to invest in
science, technology, engineering and mathematics research in
order to advance competitiveness, independence and cooperation.
The findings show that while international collaboration is high,
more engagement among African countries will benefit the
continent overall.
Risk & Business Information
Risk & Business Information tools and resources help protect
society. During the year, it enhanced its eCrash solution, which
aids law enforcement professionals by automating vehicle crash
reporting from initial data capture to report distribution. Through
the 2014 acquisition of Coplogic, eCrash now has a citizen incident
reporting capability, eliminating the need to dispatch officers to
minor incidents. This will allow forces to allocate resources to
more serious issues, potentially saving lives – more US law
enforcement officers died in traffic-related accidents than from
gun crime (2010). Risk & Business Information employees created
the Automated Delivery of Alerts on Missing Children (ADAM)
programme, which assists in the safe recovery of missing
children. Since launching in 2000, 142 children have been located,
including three in 2014. It also uses the power of its brands to aid
communities. In 2014, to help young farmers, the business unit’s
Farmers Weekly title hosted its annual business event, Fertile
Minds. 150 farmers in the early stages of their careers heard
presentations by entrepreneurs and industry experts on jobs,
wages, benefits, work load and also had the chance to address
the UK’s Farming Minister.
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RELX Group Annual Reports and Financial Statements 2014
39
PRIORITISING
ACCESSIBILITY AT
SCIENCEDIRECT,
THE WORLD’S LARGEST
SCIENTIFIC DATABASE
Investment in accessibility at
ScienceDirect – Elsevier’s full text
scientific database, with articles from
more than 2,500 active journals and
chapters from nearly 20,000 books –
makes it possible for customers with
disabilities to access content more quickly
and easily.
Over the last three years, Elsevier has
collaborated with ten university leaders in
assistive technology and accessibility to
translate best practice into improvements
of its flagship product, ScienceDirect.
The result is improved visibility for all users.
Among resulting upgrades are fewer links
on search results and journal home pages,
making it simpler for those using screen
readers to load, navigate and understand
the relevant pages. There are also ‘ARIA’
landmarks allowing screen readers to bring
up main page regions enhanced to help
users understand page composition and
facilitate skipping to key sections.
In a survey undertaken by the Publishers
Accessibility Action Group released in
2014, Elsevier was judged to have “the
broadest range of tests encompassing
screenreaders, keyboard only operation,
and screen enlargement” and was also
cited for providing captions for all images.
THE WAY WE DEVELOP SCIENCEDIRECT
DEMONSTRATES THAT WE ARE SERIOUS
ABOUT MAKING OUR PRODUCTS
ACCESSIBLE FOR EVERYONE
REGARDLESS OF ABILITY.
Ammy Vogtländer
Vice President, ScienceDirect
Product Management, Elsevier
10
Universities
ARE PART OF
ELSEVIER
ACCESSIBILITY
COLLABORATION
GROUP
University of California, Berkeley, one of the participating universities
Lucy Greco, a member of the Elsevier Accessibility Collaboration Group who
is visually impaired, demonstrates the accessibility features of ScienceDirect,
at our 2014 CR Forum Stakeholder Session
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40
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
Legal
LexisNexis Legal & Professional promotes justice through its
products and services. In 2014, it partnered with the UK National
Archives on Big Data for Law to provide new open data, tools and
research methodologies to more easily maintain and interpret
vast amounts of current legislation. It launched a free iPhone app,
My Legal Places, which locates UK police stations, courts, citizen
advice bureaus and community legal offices to support access to
justice. It also released Dressed to Kill, a report examining the
cotton industry and human trafficking undertaken in conjunction
with STOP THE TRAFFIK. The report measures media coverage of
both fashion and human trafficking to highlight key issues and
ways participants in the global cotton supply chain are working to
prevent trafficking through campaign-driven community action.
Exhibitions
Reed Exhibitions’ trade shows provide platforms for supporting
our corporate responsibility focus areas. At the start of 2014,
Comic Con New York, which attracted 151,000 attendees,
joined the Comic Book Legal Defense Fund, a non-profit
organisation protecting the rights of comics artists, publishers,
retailers, librarians and fans. During the year, to support the
development of the event management industry in China,
launched a new annual scholarship programme benefitting 50
university students studying relevant subjects. Its South African
office won a 2014 Corporate Social Responsibility Award from
Media 24 for its support of indigenous communities.
Across the Group
In 2014, we helped advance Business for the Rule of Law, a global
initiative led by the UN Global Compact with the support of other
organisations including the Atlantic Council, the World Justice
Project and the International Chamber of Commerce. Key
developments in the year include the creation of a Steering Group
and the start of international consultation on a formal framework
to be launched in 2015 focused on actions, practical examples and
interactive technology to promote corporate support for the rule
of law around the world.
During the year we began working with Oxfam on Raising Her Voice
to strengthen women’s rights in Nepal. We have supported efforts
to develop 90 community discussion groups across districts in the
country’s midwest region. The groups aim to empower women,
helping them develop action plans to address personal, family and
community challenges, while training for men aims to increase
awareness of gender equality. We are providing access to content
in health, water, sanitation, education and forestry use. Our
partnership has also broadened to include assistance with
Oxfam’s Action4Justice project, an online legal information
platform to facilitate cases that promote positive social change,
in collaboration with Greenpeace, Transparency International
and Avocats Sans Frontières.
2014 OBJECTIVES
Progress
Partner with United Nations
Global Compact to refine
and launch stakeholder
consultation on Business for
the Rule of Law
Develop media and/or
academic partnership to
further awareness and
engagement with the
Environmental Challenge
Collaboration with Oxfam to
advance Raising Her Voice
women’s rights programme
in Nepal
§§ Steering group formed;
global consultation on
framework under way
§§ Shared case studies
highlighting our support
for the rule of law as a
foundation for an
‘example hub’
§§ Media partnership with a
UK national newspaper
§§ New links with university
hydrologic science
network
§§ Supporting community
discussion groups with
health, water, sanitation,
education and forestry
use content
§§ Pro bono support for
other projects including
Action4Justice platform
2015 OBJECTIVES
§§ Support the development and release of Business for the
Rule of Law framework
§§ Power of Research: five-year Environmental Challenge
collaboration project
§§ Big Data for Good: explore project to find missing children
in Europe
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RELX Group Annual Reports and Financial Statements 2014
41
2. Governance
2014 OBJECTIVES
Progress
Implement updated corporate
governance policies
§§ Operating and
Governance Principles
reviewed by
cross-functional team
Conduct a review and refresh
of the Group’s Code of Ethics
and Business Conduct
§§ Compliance Committee
review completed, with
Board review pending
Evaluate the Company’s Export
and Trade Controls Policy and
compliance efforts
§§ Enhancements include
streamlined language;
reference to social
media; and more
learning aids and
interactivity
§§ Designees appointed
for each business;
strengthening controls
as appropriate
§§ Global policy updated for
issuance in early 2015
2015 OBJECTIVES
§§ Establish common approach to development and
management of corporate policies
§§ New communication campaigns to supplement formal
compliance training
§§ Continue to enhance trade sanctions and export controls
compliance procedures and tools
The Group’s Code of Ethics and Business Conduct (the Code) is
disseminated to every employee and sets the standards for our
corporate and individual conduct. The Code has been updated for
release during the first half of 2015. The revised Code describes
our social media policy and includes learning aids, increased
interactivity and streamlined wording. Among other topics, the
Code addresses fair competition, anti-bribery, conflicts of interest,
employment practices, data protection and appropriate use of
company property and information. It also encourages reporting of
violations – with an anonymous reporting option – and prohibits
retaliation. It makes clear our commitment to human rights,
incorporating the principles of the United Nations Global Compact
(UNGC). In accordance with the UN’s Guiding Principles on
Business and Human Rights, we have considered where and how
we operate and have concluded that there is low human rights risk
in our direct employment activities (for more information on
human rights see Supply Chain).
All employees complete training on the Code, as part of their new
hire induction and at regular intervals, to ensure their
understanding and acknowledgement of the Code. In 2014, NYSE
Governance Services ranked our Code among the top 10% of more
than 2,500 codes it has evaluated.
We also provide mandatory online training on anti-bribery,
competition laws, protecting data and preventing workplace
harassment, supplemented by in-person training for higher-risk
roles. We routinely issue computer-based training on these same
topics to new employees. We achieve 100% completion rates for all
courses within four months of issuance.
In 2014, we remained diligent in our ongoing efforts to ensure
compliance with applicable bribery laws. We improved processes
to ensure compliance with sanctions laws and are updating
relevant policy and compliance tools. We also released new
Privacy Principles setting out our approach to data protection
and privacy.
As a signatory to the UNGC and its principles, encompassing
labour, environment, anti-corruption, as well as human rights, we
demonstrated leadership in 2014 by serving on the UNGC Advisory
Group for the UK and the UNGC Supply Chain and Caring for
Climate Advisory Groups. We were also on the board of the
Alliance for Water Stewardship. UNGC peers judged our 2014
Communication on Progress, required of signatories each year,
to have attained Advanced Level. In the year, we served on the
UN Secretary General’s legal taskforce helping to consider
post-2015 sustainable development goals.
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42
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
3. People
Our 28,500 people are our strength. Our workforce is 53% female
and 47% male, with an average length of service of eight years.
There were 44% female and 56% male managers, and 29% female
and 71% male senior operational managers.
Board of directors
Senior operational
managers*
Female
3
30%
7
Male
70%
121
29%
300
71%
All employees**
15,100
53%
13,400
47%
* Senior operational managers are defined as those managers up to and including
three reporting lines from the CEO
** Full time equivalent
The Group’s Nominations Committee considers the knowledge,
experience and background of individual Board Directors. At year
end 2014, women made up 30% of the members of the Reed
Elsevier NV Board and 22% of the members of the Reed Elsevier
PLC Board. The two Executive Directors on the Board are male.
The Group’s Diversity and Inclusion (D&I) Statement
(www.relxgroup.com/go/Diversity), articulates our commitment
to a diverse workforce and environment that respects individuals
and their contributions, regardless of gender, race or other
characteristics. Our D&I Strategy is focused on translating the
Statement into practical action. Among its commitments is
maintaining a D&I Advisory Group composed of a senior business
and HR leader from each business unit, supported by a broader
D&I Working Group. We encourage both affinity groups, such as
women’s forums, which provide support and mentoring, and
community involvement.
During 2014, we took steps to develop inclusive leadership as a
core management competency engaging our heads of talent to
ensure it is incorporated in manager training. We reviewed our
Business Leadership Programme course syllabus for up and
coming leaders to ensure it contains relevant themes. In the year,
we joined Business in the Community’s Opportunity Now initiative
to tap into additional D&I expertise, shared with our D&I networks.
In 2014, CEO Erik Engstrom signed the Women’s Empowerment
Principles, a UN Global Compact and UN Women initiative, which
aim to help companies empower women and promote gender
equality. In the year, we created a template for reviewing our
existing practices relative to the Principles.
Our employees have the right to a healthy and safe workplace as
outlined in the Group’s Global Health and Safety Policy. We
concentrate on areas of greatest risk, for example, warehouses,
events and exhibitions. However, as a primarily office-based
company, our key impact areas are manual handling, slips, trips
and falls. To reduce our severity rate (lost days per 200,000 hours
worked), we conduct risk assessments, and work with a third
party in the US to assign a nurse case manager to each complex or
severe claim. The number of lost time reportable cases
decreased in the year (23 in 2014 vs 31 in 2013).
In the US, where we have our largest concentration of employees,
the REACH programme promotes workplace wellbeing through
health screenings, online assessments, stress awareness
training and weight loss and smoking cessation courses, with
financial incentives for participation. In 2014, we continued our US
health coach programme which provides personalised support to
all staff. 1,530 employees worked with a coach to help with issues
related to diet, exercise and smoking; 3,071 calls were made to
CareConnect, our health concierge service.
Our annual re:fit2win global wellbeing competition encourages
employees to establish fitness teams to compete for cash prizes
for charities of their choice. Across the Group, 79 teams took part
and ran, walked, cycled and swam a total of 89,195 miles/
143,545 kilometres, with a 22% increase in the number of
participants over 2013.
2014 OBJECTIVES
Sign up to the UN Women’s
Empowerment Principles;
review practice relative to
Principles
Develop inclusive leadership
as a core management
competency
Progress
§§ Signed
§§ Tool created to measure
business alignment;
reviews under way
§§ Heads of talent engaged
§§ Review of Business
Leadership
Programme syllabus to
identify inclusive
leadership themes
10% increase in re:fit2win
participants
§§ 22% increase in
employees participating
2015 OBJECTIVES
§§ Map internal practice against the UN Women’s
Empowerment Principles
§§ Embed inclusive leadership as a core management
competency
§§ Targeted wellness campaign focused on avoiding/managing
diabetes
94118_Reed_AR_p037-047.indd 42
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RELX Group Annual Reports and Financial Statements 2014
ENVIRONMENTAL
CHALLENGE:
ADVANCING ACCESS
TO SAFE WATER
AND SANITATION
THE GROUP PRIZE WILL ALLOW US
TO SCALE AND REACH THOUSANDS
OF GUATEMALAN FAMILIES.
Philip Wilson
Ecofiltro, second prize winner, 2014
Reed Elsevier Environmental Challenge
43
The Group Environmental Challenge
advances sustainable access to safe water
and sanitation where it is presently at risk.
Projects must be innovative, scalable,
involve local communities, and address
issues such as health, education and
non-discrimination.
The $50,000 2014 first prize winner
was Sustainable Sanitation Design
(Susan Design), an NGO which will bring
10,000 households in Uganda its low-cost,
unisex urinal featuring a safe organic
fertiliser recovery system.
The $25,000 2014 second prize winner was
Ecofiltro, a social enterprise company
working to provide thousands of families
in Guatemala with new ceramic disk filters
that remove bacteria and other harmful
agents from potable water.
The $15,000 WASH Alliance prize winner
was the Stanford Program on Water,
Health and Development which will install
automated chlorine dosing systems at
shared water points in Bangladesh used
by 2,000 families. The WASH Alliance is a
consortium of six Dutch NGOs promoting
hygienic use of sustainable water
and sanitation.
$330,000
awarded over the
past four years
Susan Design supported Ugandan farmer and his sustainably fertilised pineapple field
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44
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
4. Customers
2014 OBJECTIVES
Progress
Roll out translations of the
Group’s Editorial Policy; launch
related Data Quality Standards
Create CR ‘blueprint’ to help
sales staff enhance their
customer conversations; put
CR on the agenda at five sales
conferences
Embed Accessibility Policy and
conduct accessibility review of
at least 10 key product sites
§§ Editorial Policy translated
into 12 languages;
Editorial Policy for
Suppliers created and
rolled out
§§ Launched the Group’s
Quality First Principles
with global email from
Henry Udow, Chief Legal
Officer and Company
Secretary
§§ CR fast facts document
created and promoted
across the company
§§ CR as a Sales Tool
sessions delivered to
more than five sales teams
across the Group
§§ Accessibility Policy
launched in January by
Kumsal Bayazit, Chief
Strategy Officer
§§ 33 product sites
reviewed
2015 OBJECTIVES
§§ Conduct 10 Quality First Principles risk assessments
§§ Customer engagement: sharing our CR expertise
webinar series
§§ Develop baseline tool to determine accessibility
requirements for new and existing sites
In 2014, we surveyed over 450,000 customers through Net
Promoter Score (measuring customer loyalty) and business
dashboard programmes. This allows us to deepen our
understanding of their needs and further drives forward a
customer-centric culture across the Group. Results, reviewed by
the CEO and senior operational managers and communicated to
staff, highlight where we are doing well and where we must do
better. To aid colleagues who work with customers, during the
year we continued to incorporate CR into customer-facing staff
training with outreach to key sales and marketing teams. We
updated our intranet resource, CR as a Sales Tool; created a CR
fast facts document distributed across the business; and
developed new CR Sales Academy content.
In the year, we translated the Group’s Editorial Policy into 12
languages. The Policy commits us to producing information of
the highest quality and encompasses, among other key issues,
producing content that is accurate, clear, timely, avoids bias,
defamation, conflict of interest, plagiarism and makes a
distinction between editorial and advertising. In 2014, we also
created and rolled out an Editorial Policy for Suppliers and
launched Quality First Principles with a message to all
employees from the Chief Legal Officer and Company Secretary.
More than 100 employees and other stakeholders helped
develop the Principles, and a new Quality First Working Group
has been formed.
We are committed to improving access to our products and
services for all users, regardless of physical ability. Our
Accessibility Policy – developed in 2013 to lead the industry in
providing accessibility solutions to customers with products that
are operable, understandable and robust – was disseminated to
all employees by the Chief Strategy Officer at the start of 2014. In
the year, 33 key product sites were reviewed, and accessibility
challenges and opportunities were the theme of the 2014 CR
Forum Stakeholder session; participants included a corporate
peer responsible for accessibility, a member of Elsevier’s
Accessibility and Usability Collaboration Group, who herself is a
blind user, the founder of a disability NGO and the leader of our
Accessibility Working Group. The session was webcast to a live
audience and made available on the corporate intranet for all
employees. In 2014, members of the Accessibility Working Group
logged over 100 accessibility projects and Elsevier’s Global Books
Digital Archive fulfilled more than 4,500 disability requests, 60%
of them through AccessText.org, a service it helped establish.
94118_Reed_AR_p037-047.indd 44
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RELX Group Annual Reports and Financial Statements 2014
45
5. Community
6. Supply chain
RE Cares, our global community programme, promotes education
for disadvantaged young people that advances one or more of our
unique contributions as a business, and allows staff up to two
days’ paid leave per year for their own community work. We
donated £3.4m in cash (including through matching gifts) and the
equivalent of £2.6m in products, services and staff time in 2014.
32% of employees were engaged in volunteering through RE
Cares and we reached nearly 34,000 disadvantaged young people
through time, in-kind and cash donations. In the year, we expanded
our RE Cares Champions network with 21 new Champions (190 in
total) covering 19 offices; we also created an induction programme
to help them plan activities and engage staff. In 2014, we increased
volunteering in company time by 6%.
Each September, we hold RE Cares Month to celebrate our
community activities and in 2014, over 50% of the Group’s
locations around the world took part. Among them, LexisNexis
Legal & Professional in New York helped organise a children’s
library for Books for Kids, while their counterparts in South Africa
engaged senior leaders in cycling over 200km to raise funds for
three charities in Johannesburg, Durban and Cape Town.
During RE Cares Month, we held our annual global book drive
yielding nearly 11,000 books for local and developing world
readers, and announced the winners of the fourth Recognising
Those Who Care Awards to highlight the contributions to RE Cares
of eight individuals and four RE Cares teams. Individual winners
from across the business travelled to Cameroon with Book Aid
International, a charity partner for more than 10 years, which
provides books and library support services to 12 countries in
sub-Saharan Africa. The trip was led by Youngsuk ‘YS’ Chi,
RELX Group Director of Corporate Affairs. Among the teams
winning for exceptional community engagement were Risk &
Business Information Skokie, Illinois which organised 29
volunteer programmes over one year and Reed Exhibitions
Norwalk, Connecticut which volunteered more than 500 hours
in the same period.
2014 OBJECTIVES
Progress
Increase use of two days’
volunteering by 10%
Expand RE Cares Champions
network and create new
induction programme
§§ 6% increase achieved
§§ 21 new Champions
recruited
§§ Induction programme
developed with new
tools including an
introductory webinar
and handbook
2015 OBJECTIVES
§§ 60% of locations taking part in RE Cares Month
§§ Develop RE Cares impact measurement tool
We require our suppliers to meet the high standards we set for
ourselves. Our Supplier Code of Conduct stipulates adherence to
all laws and best practice in areas such as human rights, labour
and the environment. Through our Socially Responsible Supplier
(SRS) database, in 2014, we tracked 499 critical, preferred and
strategic suppliers, and those we deem high risk according to the
Carnstone Supplier Risk Tool developed for the Group which
incorporates eight indicators, including human trafficking
information from the US State Department and Environmental
Performance Index results produced by Yale and Columbia
universities. The tracking list changes year-on-year based on the
number of suppliers we do business with who meet the required
criteria. We started 2014 with 57% of suppliers on the SRS tracking
list as signatories to the Supplier Code and reached 84% by year
end (2% of the total are suppliers which have provided internal
codes, which we believe to be a stringent as our own, in lieu).
We have embedded signing the Supplier Code into our e-sourcing
tool as a criterion for doing business with us, and have an
additional 1,885 supplier signatories.
Specialist supply chain auditors, Intertek, undertook 56 external
audits of high-risk suppliers, using their comprehensive
Workplace Conditions Assessment template. Any incidence of
non-compliance identified in the audit process triggers a
corrective action plan agreed with the supplier, with remediation
required on all issues.
We implemented our new US Supplier Diversity programme
in 2014, which invites tenders from diverse suppliers, and all
relevant staff received training. The programme provides
suppliers with feedback after competitive bidding and
opportunities for development, while an improved diverse
supplier tracking system is helping us understand how we
are doing in this area.
2014 OBJECTIVES
Progress
Supplier Code of Conduct
incorporated into terms and
conditions of purchase orders
Expand use of new Workplace
Conditions Assessment
tool to enhance high-risk
supplier audits
Implement new US Supplier
Diversity programme
§§ Incorporated into nearly
28,000 purchase orders,
valued at over $500m
§§ 56 Workplace
Conditions Assessment
audits completed
§§ Programme launched
encompassing internal
training for procurement
staff
§§ Number of opportunities
and business awarded
tracked
2015 OBJECTIVES
§§ Increase core suppliers as signatories to the Code
§§ Enhance external Workplace Conditions Assessment tool
with external review of Corrective Action Plan fulfilment
§§ Advance US Supplier Diversity and Inclusion programme
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46
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
7. Environment
2014 OBJECTIVES
Progress
45% of electricity from
renewable energy or
Renewable Energy Certificates
70% of key locations to
achieve five or more Group
Environmental Standards
Expand Green Heroes
programme recognising
employee action
§§ Goal achieved; renewable
energy certificates
purchased through
US auction
§§ 72% achieved (81 locations
designated green vs 77
in 2013)
§§ New Green Heroes
award programme with
individual and Green
Team winners
2015 OBJECTIVES
§§ Consultation on new environmental targets with
key stakeholders
§§ 50% of electricity from renewable energy or Renewable
Energy Certificates
§§ 75% of key locations to achieve five or more Group
Environmental Standards
Our environmental targets reflect our performance and focus
areas and can be found, along with full details, in the 2014
Corporate Responsibility Report at www.relxgroup.com/go/
CRReport.
In 2014, we purchased 46% of our electricity from renewable
energy and renewable energy certificates, and were ranked
among the top FTSE 350 companies for disclosure in the 2014
CDP Leadership Index, representing 767 investors with assets
of $92,000bn. The Group received an A grade in CDP’s Global
Performance Leadership Index.
Our Environmental Champions network, employee-led Green
Teams, and engagement through networks such as Publishers
database for Responsible Ethical Paper Sourcing, inform how
we address our environmental impacts. Our Environmental
Standards programme sets benchmark performance levels and
inspires green competition among offices. In 2014, 81 sites (72% of
key locations) achieved five or more standards and attained green
status. The Chief Financial Officer wrote to all staff recognising
their achievements on World Environment Day and also identified
Green Heroes across the company, nominated by their peers for
their environmental efforts. New in 2014, Green Teams submitted
environmental project ideas to engage staff; winners received
funding to carry out their plans. The overall winner of the
individual category chose to join a research expedition with
Earthwatch in Malawi.
We have a positive environmental impact through our
environmental publications and services which spread good
practice, encourage debate and aid researchers and decision
makers. The most recent results from independent Market
Analysis System show our share of citations in environmental
science represented 40% of the total market, and 79% in energy
and fuels. In the year, we continued to map the range of
our environmental products and services, covering some
400 products on areas such as ocean and coastal management,
forestry, environmental law and waste management, and trade
shows on environmental engineering, renewable energy
and water.
94118_Reed_AR_p037-047.indd 46
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RELX Group Annual Reports and Financial Statements 2014
47
2014 ENVIRONMENTAL PERFORMANCE
TARGETS
Scope 1 (direct
emissions) tCO2e
Scope 2 (gross
electricity and
heat) tCO2e
Total energy
(MWh)
Office energy
(MWh)
Absolute performance
Intensity ratio
(Absolute/revenue £m)
2014 variance
2013
2014 variance
2013
8,932
-23% 11,602
1.55
-20%
1.92
109,129
-4% 113,691
18.90
0% 18.84
Focus area
Climate
change
Key performance indicators
Scope 1 intensity (direct
emissions)
Scope 2 intensity
(gross electricity and heat)
Office energy use intensity
Energy
222,658
-7% 239,187
38.57
-3% 39.63
109,387
-9% 120,381
18.95
-5% 19.95
Water (m3)
343,661
-14% 401,788
59.53
-11% 66.58
Water
Waste diverted
from landfill (%)*
Production
paper (t)
70% 1%pt
69%
1.19
1%
1.18
52,163
6% 49,410
9.04
10%
8.19
Waste
* Intensity metric shows tonnes of waste diverted from landfill /£m revenue
Percentage of electricity from
renewables or Renewable
Energy Certificates
Average data centre Power
Usage Effectiveness (PUE)
Percentage of key locations
achieving 10 m3 of water per
person per year
Waste diverted from landfill
Target
2010–2015
-20%
-10%
-20%
50%
1.69
100%
Achievement
to date
-29%
Achieved
-22%
Achieved
-26%
Achieved
46%
Under way
1.65
Achieved
90%
Under way
75%
70%
Under way
We have reported on all emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Report), Regulations
2013. These sources fall within our combined financial statement. We have included emissions from the operating companies within the
combined businesses.
We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) and the data has been assured by
an independent third party, EY. Details on methodology and the assurance statement can be viewed in the 2014 Corporate Responsibility
Report at www.relxgroup.com/go/CRReport.
2014 Recognition:
Business in the Community
CR Index
– included
Dow Jones Sustainability
Indices
– included
CDP Indexes:
– Global Climate Performance
Leadership Index: Grade A
– Disclosure Leadership Index
Green Power Leader, US EPA
FTSE4Good Index
– included
Natural Capital Leaders
Index
– included
Carbon Clear FTSE 100
rankings
– Top 20
ECPI Indices
– included
UK National Business
Awards
– Sustainability Award
finalist
STOXX Global ESG Leaders
Indices
– included
Four Euronext Vigeo indices
– UK 20
– Benelux 20
– Eurozone 120
– Europe 120
Oekom
– First in media sector
THE FULL 2014 CORPORATE RESPONSIBILITY REPORT IS AVAILABLE AT WWW.RELXGROUP.COM/GO/CRREPORT
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RELX Group Annual Reports and Financial Statements 2014
49
Financial
review
In this section
50 Chief Financial Officer's Report
58 Principal risks
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50
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Chief Financial Officer’s report
Nick Luff
Chief Financial Officer
Financial stewardship and
discipline are important to the
Group for the benefit of
shareholders. In 2014, we
maintained the trends in financial
performance that have been
delivered in recent years. Return
on Invested Capital improved
to 12.8%. Our balance sheet
remains strong and cash
generation was robust.
Revenue
Growth of underlying revenue, which excludes the effects of currency
translation, acquisitions, disposals and exhibition cycling, was 3%,
with all four business areas contributing to underlying growth.
At constant currencies, revenue growth was 1%.
SOURCES OF 2014 REVENUE GROWTH
YEAR TO 31 DECEMBER
2013 revenue
Underlying growth
Exhibition cycling
Acquisitions
Disposals
Currency effects
2014 revenue
£m
Change
6,035
171
30
77
(228)
(312)
5,773
+3%
+1%
+1%
–4%
–5%
–4%
The difference between underlying and constant currency growth
rates reflects the impact of acquisitions, disposals and exhibition
cycling in 2013 and 2014. If exhibition cycling effects had been
included, underlying revenue growth would have been 4%. The
overall effect of disposals in 2014 was to reduce revenue growth by
4%, partially offset by a 1% contribution from acquisitions.
Disposals made throughout 2014 will continue to impact reported
revenue and operating profit growth rates in 2015.
The impact of currency movements was to reduce revenue by 5%,
principally due to the weakening of the US dollar, on average,
against sterling during 2014.
Profit
Underlying adjusted operating profit grew ahead of revenue at 5%.
Total adjusted operating profit was £1,739m, down 1%, while at
constant currencies adjusted operating profits were up 5%.
SOURCES OF 2014 PROFIT GROWTH
YEAR TO 31 DECEMBER
£m
Change
2013 adjusted operating profit
Underlying growth
Acquisitions
Disposals
Currency effects
1,749
78
11
(2)
(97)
2014 adjusted operating profit
1,739
+5%
–
–
–6%
–1%
Acquisitions and disposals had no net impact on adjusted operating
profit. Currency effects reduced adjusted operating profit by 6%.
REVENUE
£m
6,002
6,116
6,035
5,773
2011
2012
2013
2014
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RELX Group Annual Reports and Financial Statements 2014
51
Profit continued
Adjusted figures
Revenue
Operating profit
Operating margin
Profit before tax
Net profit
Net margin
Cash flow
Cash flow conversion
Return on invested capital
* Excluding exhibition cycling.
2014
£m
2013
£m
Change
Change
at constant
currencies
Change
underlying
5,773
1,739
30.1%
1,592
1,213
21.0%
1,662
96%
12.8%
6,035
1,749
29.0%
1,572
1,197
19.8%
1,703
97%
12.1%
+3%*
+5%
–4%
–1%
+1%
+1%
–2%
+1%
+5%
+7%
+7%
+3%
The Group uses adjusted and underlying figures as additional performance measures. Adjusted figures primarily exclude the amortisation of acquired intangible assets and
other items related to acquisitions and disposals, and the associated deferred tax movements. Reconciliation between the reported and adjusted figures are set out in note 10
to the combined financial statements on page 114. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals
made in both the year and prior year and assets held for sale. Underlying revenue growth rates also exclude the effects of exhibition cycling. Constant currency growth rates
are based on 2013 full year average and hedge exchange rates.
Underlying costs were up 3%, reflecting investment in global
technology platforms and the launch of new products and
services, partly offset by continued process innovation. Actions
were taken across our businesses to improve cost efficiency.
Total operating costs, including the impact of acquisitions and
disposals, decreased by 6%. At constant currencies, total
operating costs decreased by 1%.
The net pension expense, excluding the net pension financing
charge, was £95m (2013: £61m), including settlement and past
service credits of £15m (2013: £59m).
The overall adjusted operating margin at 30.1% was 1.1 percentage
points higher than in the prior year. This included a 0.9 percentage
point benefit to margin from portfolio change and a 0.1 percentage
point decrease from currency effects.
Interest expense, excluding the net pension financing charge,
was £147m (2013: £177m). The reduction primarily reflects the
benefit of term debt refinancing at lower rates and currency
translation effects.
Adjusted profit before tax was £1,592m (2013: £1,572m), up 1%.
At constant exchange rates, adjusted profit before tax was up 7%,
reflecting the increase in constant currency adjusted operating
profits and a lower net interest expense.
The adjusted effective tax rate on adjusted profit before tax was
23.5%, in line with the prior year. The effective tax rate excludes
movements in deferred taxation assets and liabilities related to
goodwill and acquired intangible assets, and includes the benefit
of tax amortisation where available on those items. Adjusted
operating profits and taxation are grossed up for the equity share
of taxes in joint ventures.
The application of tax law and practice is subject to some uncertainty
and amounts are provided in respect of this. Discussions with tax
authorities relating to cross-border transactions and other matters
are ongoing. Although the outcome of open items cannot be predicted,
no significant impact on profitability is expected.
The adjusted net profit attributable to shareholders of £1,213m
(2013: £1,197m) was up 1% and up 7% at constant currencies.
ADJUSTED OPERATING PROFIT
ADJUSTED OPERATING PROFIT MARGIN
£m
1,626
1,688*
1,749
1,739
27.1%
27.6%*
29.0%
30.1%
2011
2012
2013
2014
2011
2012
2013
2014
* 2012 restated for IAS19.
* 2012 restated for IAS19.
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52
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Cash flows
Adjusted cash flow was £1,662m (2013: £1,703m), down 2%
compared with the prior year and up +3% at constant currencies.
The rate of conversion of adjusted cash flow was 96% (2013: 97%).
CONVERSION OF ADJUSTED OPERATING PROFIT INTO CASH
YEAR TO 31 DECEMBER
Adjusted operating profit
Capital expenditure
Depreciation and amortisation of internally
developed intangible assets
Working capital and other items
Adjusted cash flow
Cash flow conversion
2014
£m
1,739
(270)
237
(44)
1,662
96%
2013
£m
1,749
(308)
249
13
1,703
97%
Capital expenditure was £270m (2013: £308m), including £203m
(2013: £251m) in respect of capitalised development costs.
This reflects sustained investment in new products and related
infrastructure, particularly in the Legal business. Depreciation
and the amortisation of capitalised development costs were
£237m (2013: £249m). Capital expenditure was 4.7% of revenue
(2013: 5.1%). Depreciation and amortisation were 4.1% of revenue
(2013: 4.1%).
Tax paid increased to £363m (2013: £347m), reflecting increased
taxable profits, predominantly in the US. Interest paid was £126m
(2013: £195m).
Payments made in respect of acquisition-related costs amounted
to £27m (2013: £28m). Payments relating to exceptional
restructuring programmes from prior years were nil (2013: £12m).
Free cash flow before dividends was £1,156m (2013: £1,131m).
Ordinary dividends paid to shareholders in the year, being the 2013
final and 2014 interim dividends, amounted to £565m (2013: £549m).
Free cash flow after dividends was £591m (2013: £582m).
Total consideration on acquisitions completed in the year was
£385m (2013: £230m).
FREE CASH FLOW
YEAR TO 31 DECEMBER
Adjusted cash flow
Interest paid
Tax paid
Acquisition-related/restructuring costs*
Free cash flow before dividends
Ordinary dividends
Free cash flow post dividends
* Including cash tax relief.
2014
£m
1,662
(126)
(363)
(17)
1,156
(565)
591
2013
£m
1,703
(195)
(347)
(30)
1,131
(549)
582
Cash spent on acquisitions was £437m (2013: £231m), including
deferred consideration of £34m (2013: £21m) on past acquisitions,
payments of £15m (2013: nil) for the acquisition of non-controlling
interests, spend on venture capital investments of £6m (2013: £10m)
and borrowings in acquired businesses totalling £20m (2013: nil).
Total consideration on the disposal of non-strategic assets in 2014
was £74m (2013: £331m), including £10m (2013: £6m) in respect of
freehold properties. Net cash received after timing differences and
separation and transaction costs was £53m (2013: £195m). Net tax
recovered in respect of disposals was £5m (2013: tax paid £25m).
Share repurchases by the parent companies in 2014 were
£600m (2013: £600m), with a further £100m repurchased in 2015 as
at 25 February. The Employee Benefit Trust purchased shares of
the parent companies to meet future obligations in respect of share
based remuneration totalling £39m (2013: nil). Proceeds from the
exercise of share options were £45m (2013: £125m).
RECONCILIATION OF NET DEBT YEAR-ON-YEAR
YEAR TO 31 DECEMBER
Net debt at 1 January
Free cash flow post dividends
Net disposal proceeds
Acquisitions
Share repurchases
Net proceeds from share options exercised
Other*
Currency translation
2014
£m
(3,072)
591
53
(437)
(639)
45
(12)
(79)
2013
£m
(3,127)
582
195
(231)
(600)
125
(44)
28
Net debt at 31 December
(3,550)
(3,072)
* Cash tax relief/payments on disposals, distributions to minorities and finance leases.
ADJUSTED CASH FLOW CONVERSION
RETURN ON INVESTED CAPITAL
NET DEBT
93%
95%*
97%
96%
£m
11.2%
3,433
11.7%*
3,127
12.1%
3,072
12.8%
3,550
2011
2012
2013
2014
2011
2011
2012
2012
2013
2013
2014
2014
* 2012 restated for IAS19.
* 2012 restated for IAS19.
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RELX Group Annual Reports and Financial Statements 2014
53
Funding
Debt
Net borrowings at 31 December 2014 were £3,550m, an increase of
£478m since 31 December 2013. The majority of our borrowings
are denominated in US dollars and the weakening of sterling
against the dollar at the year end compared with the start of the
year resulted in higher net borrowings when translated into
sterling. Excluding currency translation effects, net borrowings
increased by £399m. Expressed in US dollars, net borrowings
at 31 December 2014 were $5,532m, an increase of $443m.
Gross borrowings at 31 December 2014 amounted to £3,825m
(2013: £3,281m). The fair value of related derivative liabilities
was £1m (2013: assets of £77m). Cash balances totalled £276m
(2013: £132m). In aggregate, these give the net borrowings figure
of £3,550m (2013: £3,072m).
The effective interest rate on gross borrowings was 4.2% in 2014,
down from 4.8% in the prior year. As at 31 December 2014, after
taking into account interest rate derivatives, a total of 52% of gross
borrowings were at fixed rates with a weighted average remaining
life of 5.8 years.
The ratio of net debt to 12-month trailing EBITDA (adjusted
earnings before interest, tax, depreciation and amortisation) was
1.7x (2013: 1.6x). Incorporating the capitalisation of operating
leases and the pension deficit, in line with the approach taken by
the credit rating agencies, the ratio was 2.3x (2013: 2.1x).
Liquidity
In June 2014, the first of two one-year extension options was
exercised on the $2.0bn committed bank facility, taking the maturity
to July 2019. This back-up facility provides security of funding for
short-term debt. At 31 December 2014, this facility was undrawn.
In May 2014, €350m of euro denominated floating rate term debt
was issued with a maturity of three years, and swapped to $480m
on issue. In August 2014, £300m of sterling denominated fixed rate
term debt was issued with a maturity of five years and a coupon of
2.75%. In December 2014, $20m of US term debt maturing in
January 2019 was purchased on the open market.
The Group has ample liquidity and access to debt capital markets,
providing the ability to repay or refinance borrowings as they mature.
Invested capital and returns
SUMMARY BALANCE SHEET
AS AT 31 DECEMBER
Goodwill and acquired intangible assets*
Internally developed intangible assets*
Property, plant and equipment* and
investments
Net (liabilities)/assets held for sale
Net pension obligations
Working capital
2014
£m
7,365
780
464
(2)
(632)
(1,124)
2013
£m
6,980
720
454
18
(379)
(1,156)
Net capital employed
6,851
6,637
* Net of accumulated depreciation and amortisation.
Net capital employed was £6,851m at 31 December 2014
(2013: £6,637m), an increase of £214m.
The carrying value of goodwill and acquired intangible assets
increased by £385m, reflecting the strengthening of the dollar
against sterling and acquisitions in 2014, partly offset by the
annual amortisation charge and divestments. An amount of £187m
was capitalised in the year in respect of acquired intangible assets
and £240m was recorded as goodwill.
Development costs of £203m (2013: £251m) were capitalised within
internally developed intangible assets, most notably investment
in new products and related infrastructure in the Legal business.
Net pension obligations, i.e. pension obligations less pension
assets, increased to £632m (2013: £379m). There was a deficit of
£439m (2013: £219m) in respect of funded schemes, which were
on average 91% funded at the end of the year on an IFRS basis.
The higher deficit reflects lower discount rates in the UK, US and
the Netherlands.
Gross capital employed at 31 December 2014 was £11,604m
(2013: £11,155m) after adding back accumulated amortisation and
impairment of acquired intangible assets and goodwill. The increase
principally reflects currency effects, which more than offset the
impact of disposals and an increase in the net pension deficit.
The post-tax return on average invested capital in the year was 12.8%
(2013: 12.1%). This is based on adjusted operating profits for the year, less
tax at the effective rate, and the average of the gross capital employed at
the beginning and end of the year, retranslated at the average exchange
rates, adjusted to exclude the gross up to goodwill in respect of
deferred tax liabilities established on certain acquired intangible
assets. The increase in the return reflects the improved trading
performance and a lower capital base (at average exchange rates).
TERM DEBT MATURITY PROFILE
RETURN ON INVESTED CAPITAL
$m
186
982
623
868
666
382
993
0
150
0
207
150
11.2%
11.7%*
12.1%
12.8%
2015 2016 2017 2018 2019 2020 2021 2022
2023
2024 2025 >2025
2011
2012
2013
2014
* 2012 restated for IAS19.
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54
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Reported figures
Reported figures
Revenue
Operating profit
Profit before tax
Net profit
Net margin
Net borrowings
* Excluding exhibition cycling.
Change
at constant
currencies
Change
underlying
+3%*
+1%
+8%
+9%
–9%
Change
–4%
+2%
+3%
–14%
2014
£m
2013
£m
5,773
1,402
1,229
955
16.5%
3,550
6,035
1,376
1,196
1,110
18.4%
3,072
The Group uses adjusted and underlying figures as additional performance measures. Adjusted figures primarily exclude the amortisation of acquired intangible assets and
other items related to acquisitions and disposals, and the associated deferred tax movements. Reconciliation between the reported and adjusted figures are set out in note 10
to the combined financial statements on page 114. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals
made in both the year and prior year and assets held for sale. Underlying revenue growth rates also exclude the effects of exhibition cycling. Constant currency growth rates
are based on 2013 full year average and hedge exchange rates.
Reported operating profit, after amortisation of acquired
intangible assets and acquisition-related costs, was £1,402m
(2013: £1,376m).
The amortisation charge in respect of acquired intangible assets,
including the share of amortisation in joint ventures, decreased
to £286m (2013: £318m) reflecting certain assets becoming fully
amortised and currency effects. Acquisition-related costs were
£30m (2013: £43m), including a charge for deferred consideration
payments required to be expensed under IFRS.
The reported profit before tax was £1,229m (2013: £1,196m).
RECONCILIATION OF ADJUSTED AND REPORTED PROFIT
BEFORE TAX
YEAR TO 31 DECEMBER
Adjusted profit before tax
Amortisation of acquired intangible assets
Acquisition-related costs
Reclassification of tax in joint ventures
Net pension financing charge
Disposals and other non-operating items
Reported profit before tax
2014
£m
1,592
(286)
(30)
(21)
(15)
(11)
1,229
2013
£m
1,572
(318)
(43)
(12)
(19)
16
1,196
Reported net finance costs of £162m (2013: £196m) include a
charge of £15m (2013: £19m) in respect of the defined benefit
pension schemes. Net pre-tax disposal losses were £11m
(2013: gain of £16m) arising largely from the sale of certain Risk &
Business Information businesses. These losses are increased
by an associated tax charge of £3m (2013: £34m).
RECONCILIATION OF ADJUSTED AND REPORTED TAX CHARGE
YEAR TO 31 DECEMBER
Adjusted tax charge
Tax on disposals and other non-operating items
Deferred tax credits from intangible assets
Other items
Reported tax charge
2014
£m
(374)
(3)
68
40
(269)
2013
£m
(370)
(34)
300
23
(81)
The reported tax charge was £269m (2013: £81m). In 2013, the
reported tax charge included a non-recurring deferred tax credit
of £221m arising on the alignment of business assets with their
global management structure. The reported net profit attributable
to the parent companies’ shareholders was £955m (2013: £1,110m).
94118_Reed_AR_p048-060.indd 54
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RELX Group Annual Reports and Financial Statements 2014
55
Parent companies
Reed Elsevier PLC
Reported net profit
Adjusted net profit
Reported earnings per share
Adjusted earnings per share
Ordinary dividend per share
Reed Elsevier NV
Reported net profit
Adjusted net profit
Reported earnings per share
Adjusted earnings per share
Ordinary dividend per share
2014
£m
490
642
43.0p
56.3p
26.0p
€m
592
752
2013
£m
572
633
48.8p
54.0p
24.6p
€m
655
707
€0.85
€1.07
€0.589
€0.91
€0.99
€0.506
Change
at constant
currencies
+7%
+10%
+7%
+10%
Change
–14%
+1%
–12%
+4%
+6%
–10%
+6%
–7%
+8%
+16%
The reported earnings per share for Reed Elsevier PLC was down
12% at 43.0p (2013: 48.8p) and for Reed Elsevier NV was down 7%
at €0.85 (2013: €0.91), reflecting the impact of deferred tax credits
in 2013 on both companies.
Adjusted earnings per share were up 4% at 56.3p (2013: 54.0p) and
8% at €1.07 (2013: €0.99) for Reed Elsevier PLC and Reed Elsevier
NV respectively. At constant rates of exchange, the adjusted
earnings per share of both companies increased by 10%.
The equalised final dividends proposed by the respective Boards
are 19.0p per share for Reed Elsevier PLC and €0.438 per share for
Reed Elsevier NV, 6% and 17% higher respectively compared with
the prior year final dividends. This gives total dividends for the year
of 26.0p (2013: 24.6p) and €0.589 (2013: €0.506). The difference in
growth rates in the equalised final dividends, and in the earlier
interim dividends, reflects changes in the euro: sterling exchange
rate since the respective prior year dividend announcement dates.
Dividend cover, based on adjusted earnings per share and the
total interim and proposed final dividends for the year, is 2.2 times
(2013: 2.2x) for Reed Elsevier PLC and 1.8 times (2013: 2.0x) for
Reed Elsevier NV. The dividend policy of the parent companies is,
subject to currency considerations, to grow dividends broadly in
line with adjusted earnings per share while maintaining dividend
cover (being the number of times the annual dividend is covered by
the adjusted earnings per share) of at least two times over the
longer term.
During 2014, 35.2m Reed Elsevier PLC shares and 21.5m Reed
Elsevier NV shares (including R share equivalents) were
repurchased. A further 0.8m Reed Elsevier PLC shares and 2.0m
Reed Elsevier NV shares were purchased by the Employee Benefit
Trust. During 2014, 65.0m Reed Elsevier PLC shares and 40.0m
Reed Elsevier NV shares held in treasury were cancelled. As at
31 December 2014, shares in issue for Reed Elsevier PLC and
Reed Elsevier NV respectively, net of shares held in treasury,
amounted to 1,127.7m and 690.9m (including R share equivalents).
A further 4.8m Reed Elsevier PLC shares and 2.8m Reed Elsevier
NV shares have been repurchased in January and February 2015.
Elsevier Reed Finance BV
Elsevier Reed Finance BV, the Dutch parent company of the
Elsevier Reed Finance BV group (“ERF”), was directly owned by
Reed Elsevier PLC and Reed Elsevier NV during 2014. Effective
25 February 2015, Reed Elsevier PLC and Reed Elsevier NV
transferred their direct ownership interests in ERF to their jointly
owned company RELX Group plc (see “Changes to corporate
structure”, on page 57). During 2014, ERF provided treasury,
finance, intellectual property and reinsurance services to the
Group businesses through its subsidiaries in Switzerland:
Elsevier Finance SA (“EFSA”); Reed Elsevier Properties SA
(“REPSA”); and Elsevier Risks SA (“ERSA”). These three Swiss
companies were organised under one Swiss holding company,
which was in turn owned by Elsevier Reed Finance BV.
EFSA is the principal treasury centre for the combined
businesses. It is responsible for all aspects of treasury advice and
support for certain Group businesses, and undertakes foreign
exchange and derivatives dealing services for the whole Group.
EFSA also arranges or directly provides the Group businesses
with financing for acquisitions, product development and other
general requirements and manages cash pools, investments and
debt programmes on their behalf. REPSA actively manages
intellectual property assets including trademarks such as
The Lancet and databases such as Reaxys and PharmaPendium.
ERSA is responsible for reinsurance activities for Reed Elsevier.
Distributable reserves
As at 31 December 2014, the parent companies Reed Elsevier PLC
and Reed Elsevier NV each had distributable reserves of over
£1.5bn (€1.9bn). In line with respective legislation in the UK and the
Netherlands, distributable reserves are derived from the
non-consolidated parent company balance sheets. The combined
and parent company consolidated reserves reflect adjustments
such as the amortisation of acquired intangible assets that are not
taken into account when calculating distributable reserves.
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56
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Accounting policies
Capital and liquidity management
The combined financial statements are prepared in accordance
with International Financial Reporting Standards as adopted by
the European Union and as issued by the International Accounting
Standards Board following the accounting policies shown on pages
96 to 101. The accounting policies and estimates which require the
most significant judgement relate to the valuation of goodwill and
intangible assets, the capitalisation of development costs, taxation
and accounting for defined benefit pension schemes. Further
detail is provided in the accounting policies on pages 99 and 100.
Treasury policies
The main treasury risks faced by the Group are liquidity risk,
interest rate risk, foreign currency risk and credit risk.
The Boards of Reed Elsevier PLC and Reed Elsevier NV agree
overall policy guidelines for managing each of these risks and the
Boards of RELX Group plc and Elsevier Finance SA agree policies
(in line with parent company guidelines) for their respective
business and treasury centres. A summary of these policies is
provided in note 18 to the financial statements on pages 120 to 123.
Financial instruments are used to finance the combined
businesses and to hedge transactions. The Group’s businesses
do not enter into speculative transactions.
The capital structure is managed to support the Group’s objective
of maximising long-term shareholder value through appropriate
security of funding, ready access to debt and capital markets,
cost-effective borrowing and flexibility to fund business and
acquisition opportunities while maintaining appropriate leverage
to ensure an efficient capital structure.
Over the long-term, the Group seeks to maintain cash flow
conversion of 90% or higher and credit metrics that are consistent
with a solid investment grade credit rating. The typical credit
metrics are net debt to EBITDA, on a pensions and lease adjusted
and on an unadjusted basis, and free cash flow as percentage of
net debt.
The Group’s uses of free cash flow over the longer-term balance
the dividend policy, selective acquisitions and share repurchases,
while retaining the balance sheet strength to maintain access to
cost-effective sources of borrowing.
Further detail on the Group’s capital and liquidity management is
provided on page 120.
Corporate responsibility
We attach equal importance to assessing our non-financial
performance as we do in reviewing the other aspects of our
business activity. The social and environmental metrics that
appear in this report, and in the companion 2014 Corporate
Responsibility Report, have been calculated using robust
methodologies aligned with best practice. Environmental
and health and safety data has been assured by EY.
94118_Reed_AR_p048-060.indd 56
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RELX Group Annual Reports and Financial Statements 2014
57
Changes to Corporate structure: impact on
financial statements
in Reed Elsevier NV. Consequently, the consolidated earnings of
Reed Elsevier NV attributable to its ordinary shareholders will
not change.
As described in the Chairman’s introduction to Corporate
Governance on pages 66 and 67 of this report, the Boards have
reviewed the Group’s corporate structure, share listings,
equalisation arrangements and corporate entity names to explore
ways in which they might be simplified and modernised. Certain
changes have recently been made and others are being proposed
to shareholders at the Annual General Meetings of Reed Elsevier
PLC and Reed Elsevier NV to be held in April 2015. If approved,
these changes will be effective from 1 July 2015. It is important to
note that:
these changes will not impact the combined financial
statements
furthermore, there will be no impact on the consolidated
financial statements of Reed Elsevier PLC, nor on its adjusted
earnings per share
but there will be changes to the consolidated financial
statements of Reed Elsevier NV and its adjusted earnings
per share, as explained below
As a result of the proposed changes, Reed Elsevier NV’s interest in
the combined results will reduce from 50% to 47.1%. This
reduction will be matched by the cancellation of the shares
through which Reed Elsevier PLC currently owns a 5.8% interest
The proposed bonus issue of shares will increase the number
of shares in issue for Reed Elsevier NV by 53.8%. As a result,
earnings per share and dividend per share for Reed Elsevier NV
will reduce by around 35%. However, the reduction in the per
share economic interests of Reed Elsevier NV shareholders will
be offset by the number of additional shares each Reed Elsevier
NV shareholder receives in the bonus issue, leaving the economic
interest of each shareholder unchanged. In the future, adjusted
earnings per share for Reed Elsevier NV will be the same as
adjusted earnings per share for Reed Elsevier PLC, when
expressed in the same currency.
Note that, although Reed Elsevier PLC will hold a 52.9% economic
interest in RELX Group plc, voting control will continue to be held
50%/50% between the two parent companies. Both parent
companies will, therefore, continue to account for their interest in
RELX Group plc as a joint venture.
Subject to approval by Reed Elsevier NV shareholders and the
completion of the bonus issue during the first half of 2015, from the
2015 interim results onwards, historical earnings and dividend per
share figures for Reed Elsevier NV will be restated to reflect the
bonus issue. The table below illustrates the impact of the changes
on a pro forma basis.
Reed Elsevier NV
Adjusted net profit
Weighted average net shares in issue
Adjusted earnings per share
Dividend per ordinary share
Year ended 31 December 2014
Before changes to structure
Restated pro forma
€752m
700.1m(1)
€1.07
€0.589
€708m(2)
1,014.2m(3)
€0.698(4)
€0.383(5)
(1) Including ordinary share equivalents of convertible exchange shares held by Reed Elsevier PLC
(2) Reflecting Reed Elsevier NV’s reduced interest in the combined business of 47.1%
(3) Reflecting the bonus issue
(4) Equal to 56.3p at the average exchange rate of €1.24=£1
(5) Equal to 26.0p at the spot exchange rates averaged over five consecutive business days commencing on the tenth business day before the announcement of the interim and
proposed final dividends.
Nick Luff
Chief Financial Officer
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58
FINANCIAL REVIEW
PRINCIPAL RISKS
Principal risks
The Group has established risk management practices that are
embedded into the operations of the businesses, based on the
Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organisations of the Treadway
Commission (COSO). The principal risks facing the business,
which have been considered by the Audit Committees and Boards,
are described below. While our process is robust and includes
consideration of risks that would threaten the Group’s business
models and its solvency, it is not possible to identify every risk that
could affect our businesses, and the actions taken to mitigate the
risks described below cannot provide absolute assurance that a
risk will not materialise and/or adversely affect our business or
financial performance. Our risk management and internal control
processes are described in the Corporate Governance section.
A description of the business and a discussion of factors affecting
performance is set out in the Chief Executive Officer’s report and
Business Review. Financial risks are discussed in the Chief
Financial Officer’s report and in note 18 to the combined financial
statements. Our approach to managing environmental and other
non-financial risks is set out in the Business Review and the
separate Corporate Responsibility Report.
EXTERNAL RISKS
Risk
Description and impact
Mitigation
Economy and
market
conditions
Demand for our products and services may be
impacted by factors such as the economic
environment in the US, Europe and other
major economies, and levels of government
funding.
Intellectual
property rights
Data resources
Paid
subscriptions
Our products and services are largely
composed of intellectual property content
delivered through a variety of media. We rely
on trademark, copyright, patent and other
intellectual property laws to establish and
protect our proprietary rights in these
products and services. There is a risk that our
proprietary rights could be challenged,
limited, invalidated or circumvented which
may impact demand for and pricing of our
products and services.
A number of our businesses rely extensively
upon content and data from external sources.
Data is obtained from public records,
governmental authorities, customers and
other information companies, including
competitors. The disruption or loss of data
sources, either because of changes in the law
or because data suppliers decide not to supply
them could adversely affect our products
and services.
Our scientific, technical and medical (STM)
primary publications, like those of most of our
competitors, are published largely on a paid
subscription basis. There is continued debate
in government, academic and library
communities, which are the principal
customers for our STM publications,
regarding to what extent such publications
should be funded instead through fees
charged to authors or authors’ funders and/or
made freely available in some form after a
period following publication. If these methods
of STM publishing are widely adopted or
mandated, it could adversely affect our
revenue from paid subscription publications.
Our businesses are focused on professional markets which have
generally been more resilient in periods of economic downturn.
We deliver information solutions, many on a subscription basis,
which are important to our customers’ effectiveness and
efficiency. We have extended our position in long-term global
growth markets through organic new launches supported by the
selective acquisition of small content and data sets. We continue to
dispose of businesses that no longer fit our strategy.
We actively engage in developing and promoting the legal
protection of intellectual property rights. Our subscription
contracts with customers contain provisions regarding the use of
proprietary content. We are vigilant as to the use of our content
and, as appropriate, take legal action to challenge illegal
distribution sources.
We seek as far as possible to have proprietary content. Where
content is supplied to us by third parties, we aim to have contracts
which provide mutual commercial benefit. We also maintain an
active dialogue with regulatory authorities on privacy and other
data-related issues, and promote, with others, the responsible
use of data.
We engage extensively with stakeholders in the STM community to
better understand their needs and deliver value to them. We are
open to serve and are currently serving the STM community under
a broad range of payment models that can sustainably provide
researchers with the critical information tools that they need. We
focus on the integrity and quality of research through the editorial
and peer review process; we invest in efficient editorial and
distribution platforms and in innovation in platforms and tools to
make content and data more accessible and actionable; and we
ensure vigilance on plagiarism and the long-term preservation of
research findings.
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RELX Group Annual Reports and Financial Statements 2014
59
STRATEGIC RISKS
Risk
Description and impact
Mitigation
Customer
acceptance of
products
Competition
Acquisitions
Our businesses are dependent on the
continued acceptance by our customers of
our products and services and the value
placed on them. Failure to meet evolving
customer needs could impact demand for our
products and consequently adversely affect
our revenue.
Our businesses operate in highly competitive
markets, which continue to evolve in
response to technological innovations,
legislative and regulatory changes, the
entrance of new competitors and other
factors. Failure to anticipate market trends
could impact the competitiveness of our
products and services and consequently
adversely affect our revenue.
We regularly make small acquisitions to
strengthen our portfolio. If we are unable to
generate the anticipated benefits such as
revenue growth and/or cost savings
associated with these acquisitions this could
adversely affect return on invested capital
and financial condition.
We are focused on the needs and economics of our customers and
employ user-centred design and customer analytics to provide
content and innovative solutions that help them achieve better
outcomes and enhance productivity.
We gain insights into our markets, evolving customers’ needs, the
potential application of new technologies and business models,
and the actions of competitors. These insights inform our market
strategies and operational priorities. We continuously invest
significant resources in our products and services, and the
infrastructure to support them.
Acquisitions are made within the framework of our overall
strategy, which emphasises organic development. We have a well
formulated process for reviewing and executing acquisitions and
for managing the post-acquisition integration. This process is
underpinned with clear strategic, financial and ethical criteria. We
closely monitor the integration and performance of acquisitions.
OPERATIONAL RISKS
Risk
Description and impact
Mitigation
Technology
failure
Data security
Supply chain
dependencies
Talent
Our businesses are dependent on electronic
platforms and networks, primarily the
internet, for delivery of products and
services. These could be adversely affected if
our electronic delivery platforms or networks
experience a significant failure, interruption,
or security breach.
Our businesses maintain databases and
information that are accessed online,
including personal information. Breaches of
our data security or failure to comply with
applicable legislation or regulatory or
contractual requirements could damage our
reputation and expose us to risk of loss,
litigation and increased regulation.
Our organisational and operational
structures are dependent on outsourced and
offshored functions. Poor performance or
failure of third parties to whom we have
outsourced activities could adversely affect
our business performance, reputation and
financial condition.
The implementation and execution of our
strategies and business plans depend on our
ability to recruit, motivate and retain
high-quality people. We compete globally and
across business sectors for talented
management and skilled individuals,
particularly those with technology and data
analytics capabilities. An inability to recruit,
motivate or retain such people could
adversely affect our business performance.
We have established procedures for the protection of our
technology assets. These include the development of business
continuity plans, including IT disaster recovery plans and back-up
delivery systems, to reduce business disruption in the event of a
major technology failure.
We have established data privacy and security programmes and
evolve our programmes in line with emerging threats. We test and
re-evaluate our procedures and controls with the aim of ensuring
that personal data is protected and that we comply with relevant
legislative, regulatory and contractual requirements.
We select our vendors with care and establish contractual service
levels that we closely monitor, including through key performance
indicators and targeted supplier audits. We have developed
business continuity plans to reduce disruption in the event of a
major failure by a vendor.
We have well established management development and talent
review programmes. We monitor capability needs and
remuneration schemes are tailored to attract and motivate the
best talent available at an appropriate level of cost. We actively
seek feedback from employees, which feeds into plans to enhance
employee engagement and motivation.
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60
FINANCIAL REVIEW
PRINCIPAL RISKS
FINANCIAL RISKS
Risk
Pensions
Tax
Treasury
Description and impact
Mitigation
We have professional management of our pension
schemes and we focus on maintaining appropriate asset
allocation and plan designs. We review our funding
requirements on a regular basis with the assistance of
independent actuaries and ensure that the funding plans
are appropriate.
We have clear and consistent tax policies and tax matters
are dealt with by a professional tax function, supported
by external tax advisers. We maintain an open dialogue
with the relevant tax authorities and are vigilant in
ensuring that we comply with tax legislation.
Our approach to funding and the management of
financial risks, including interest rate and foreign
currency exposures, is described in note 18 to the
combined financial statements.
We operate a number of pension schemes around the
world. Historically, the largest schemes have been local
versions of the defined benefit type in the UK, the US and
the Netherlands. The assets and obligations associated
with those pension schemes are sensitive to changes in
the market values of assets and the market-related
assumptions used to value scheme liabilities. Adverse
changes to, inter alia, asset values, discount rates or
inflation could increase future pension costs and
funding requirements.
Our businesses operate globally and our earnings are
subject to taxation in many differing jurisdictions and at
differing rates. We seek to organise our affairs in a tax
efficient manner, taking account of the jurisdictions in
which we operate. However, tax laws that apply to our
businesses may be amended by the relevant authorities
or interpreted differently, which could adversely affect
our reported results.
The Reed Elsevier combined financial statements
are expressed in pounds sterling and are subject to
movements in exchange rates on the translation of the
financial information of businesses whose operational
currencies are other than sterling. The US is our most
important market and, accordingly, significant
fluctuations in the US dollar exchange rate could
significantly affect our reported results.
Macro economic, political and market conditions may
also adversely affect the availability of short and
long-term funding, volatility of interest rates, currency
exchange rates and inflation.
REPUTATIONAL RISKS
Risk
Ethics
Environmental
Description and impact
Mitigation
As a world-leading provider of professional information
solutions to the STM, risk & business information, legal,
and exhibitions markets we are expected to adhere to
high standards of independence and ethical conduct.
A breach of generally accepted ethical business
standards could adversely affect our business
performance, reputation and financial condition.
Our businesses have an impact on the environment,
principally through the use of energy and water, waste
generation and, in our supply chain, through paper use
and print and production technologies. Failure to
manage our environmental impact could adversely
affect our reputation.
Our Code of Ethics and Business Conduct is provided to
every employee and is supported by training. It
encompasses such topics as fair competition,
anti-bribery and human rights and encourages open
and principled behaviour. We have well established
processes for reporting and investigating instances of
unethical conduct. Our major suppliers are required to
adopt our Supplier Code of Conduct.
We are committed to reducing these environmental
impacts by limiting resource use and efficiently
employing sustainable materials and technologies.
We require our major suppliers and contractors to
meet the same objectives. We seek to ensure that all
our businesses are compliant with relevant
environmental regulation.
The Strategic Report, as set out on pages 2 to 60, has been approved by the Board of Reed Elsevier PLC in accordance
with local UK requirements.
By order of the Board
Henry Udow
Company Secretary
25 February 2015
Registered Office
1–3 Strand
London
WC2N 5JR
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RELX Group Annual Reports and Financial Statements 2014
61
Governance
In this section
62 Board Directors
64 RELX Group Business Leaders
66 Chairman’s introduction to
Corporate Governance
68 Corporate Governance
74 Report of the Nominations Committee
75 Directors’ Remuneration Report
89 Report of the Audit Committees
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62
GOVERNANCE
BOARD DIRECTORS
Board Directors
Executive Directors
Non-Executive Directors
Erik Engstrom (51)
Chief Executive Officer
Anthony Habgood (68)
Chairman
R N C
Wolfhart Hauser (65)
Chairman of the Remuneration Committee
R C
Appointed: Chief Executive Officer since 2009.
Joined Reed Elsevier as Chief Executive Officer
of Elsevier in 2004.
Nationality: Swedish
Other appointments: Non-Executive Director
of Smith & Nephew plc.
Past appointments: Prior to joining Reed Elsevier
was a partner at General Atlantic Partners.
Before that was President and Chief Operating
Officer of Random House Inc and, before its
merger with Random House, President and Chief
Executive Officer of Bantam Doubleday Dell, North
America. Began his career as a consultant with
McKinsey. Served as a Non-Executive Director of
Eniro AB and Svenska Cellulosa Aktiebolaget SCA.
Education: Holds a BSc from Stockholm School
of Economics, an MSc from the Royal Institute
of Technology in Stockholm, and gained an
MBA from Harvard Business School as a
Fulbright Scholar.
Appointed: 2009
Nationality: British
Other appointments: Chairman of: Court of the
Bank of England, Preqin Holding Limited and
Norwich Research Partners LLP.
Past appointments: Previously was Chairman of
Whitbread plc, Bunzl plc and of Mölnlycke Health
Care Limited and served as Chief Executive of
Bunzl plc, Chief Executive of Tootal Group plc and
a Director of The Boston Consulting Group.
Formerly Non-Executive Director of Geest plc,
Marks and Spencer plc, National Westminster
Bank plc, Powergen plc, SVG Capital plc, and
Norfolk and Norwich University Hospitals Trust.
Education: Holds an MA in Economics from
Cambridge University and an MS in Industrial
Administration from Carnegie Mellon University.
He is a visiting Fellow at Oxford University.
Appointed: 2013
Nationality: German
Other appointments: Chief Executive Officer
of Intertek Group plc and a Non-Executive
Director of Associated British Foods plc.
Past appointments: Chairman of
Dragenopharm GmbH & Co AG from 2002 to
2006. Prior to that he was Chief Executive Officer
of TÜV Suddeutschland between 1998 and 2002
and Chief Executive Officer of TÜV Product
Service GmbH for 10 years. Served as a
Non-Executive Director of Logica plc and
Intertek Group plc before his current position
at the company.
Nick Luff (47)
Chief Financial Officer
Marike van Lier Lels (55)
Non-Executive Director of Reed Elsevier NV
C
Robert Polet (59)
Non-Executive Director
R C
Appointed: Chief Financial Officer on
1 September 2014
Nationality: British
Other appointments: Non-Executive Director
of Lloyds Banking Group plc.
Past appointments: Prior to joining Reed Elsevier
was Group Finance Director of Centrica plc from
2007. Before that he was Chief Financial Officer
at The Peninsular & Oriental Steam Navigation
Company (P&O) and its affiliated companies,
having previously held a number of senior
finance roles at P&O. Began his career as an
accountant with KPMG. Formerly a
Non-Executive Director of QinetiQ Group plc.
Education: Has a degree in Mathematics from
Oxford University and is a qualified UK
Chartered Accountant.
Appointed: 2010
Nationality: Dutch
Other appointments: Member of the Supervisory
Boards of TKH Group NV, Eneco Holding NV and
Royal Imtech NV, and a member of the Executive
Committee of Aegon Association. A member of
various Dutch governmental advisory boards.
Past appointments: Member of the Supervisory
Boards of Maersk BV, KPN NV and USG People
NV, and Executive Vice President and Chief
Operating Officer of the Schiphol Group. Prior to
joining Schiphol Group, was a member of the
Executive Board of Deutsche Post Euro Express
and held various senior positions with Nedlloyd.
Appointed: 2007
Nationality: Dutch
Other appointments: Chairman of Safilo Group
S.p.A., Chairman of the Supervisory Board of
Rituals Cosmetics BV, and a Non-Executive
Director of Philip Morris International Inc, William
Grant & Sons Limited, Scotch and Soda NV and
Crown Topco Limited, parent company of Vertu.
Past appointments: President and Chief
Executive Officer of Gucci Group from 2004 to
2011, having previously spent 26 years at
Unilever working in a variety of positions
including President of Unilever’s Worldwide Ice
Cream and Frozen Foods division. Formerly a
member of the Supervisory Board of Nyenrode
Foundation and a Non-Executive Director of
Wilderness Holdings Limited.
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RELX Group Annual Reports and Financial Statements 2014
63
Adrian Hennah (57)
Non-Executive Director
A C
Lisa Hook (56)
Senior Independent Director
R N C
Appointed: 2011
Nationality: British
Other appointments: Chief Financial Officer
of Reckitt Benckiser Group plc and
Non-Executive Director of Indivior PLC.
Past appointments: Chief Financial Officer
of Smith & Nephew plc from 2006 to 2012. Before
that was Chief Financial Officer of Invensys plc,
having previously held various senior finance and
management positions with GlaxoSmithKline
for 18 years.
Appointed: 2006
Nationality: American
Other appointments: President and Chief
Executive Officer of Neustar, Inc and a Director
of Vantiv, Inc and Island Press. Serves on the
US President’s National Security
Telecommunications Advisory Committee
(NSTAC), and as a member of the Advisory Board
of the Peggy Guggenheim Collection.
Past appointments: President and Chief
Executive Officer at Sun Rocket Inc. Before that
was President of AOL Broadband, Premium and
Developer Services. Prior to joining AOL, was a
founding partner at Brera Capital Partners LLC.
Previously Chief Operating Officer of Time
Warner Telecommunications and has served as
Senior Advisor to the Federal Communications
Commission Chairman and a Senior Counsel
to Viacom Cable. Formerly a Director of Covad
Communications, Inc and The Ocean Foundation.
Linda Sanford (62)
Non-Executive Director
A C
Ben van der Veer (63)
Chairman of the Audit Committees
A N C
Board Committee Membership
Appointed: 2012
Nationality: American
Other appointments: An independent Director of
Consolidated Edison, Inc. Serves on the boards
of directors of The Business Council of New York
State and the Partnership for New York City.
Also serves on the boards of trustees of the
State University of New York, St John’s
University, Rensselaer Polytechnic Institute and
the New York Hall of Science.
Past appointments: Senior Vice President,
Enterprise Transformation, IBM Corporation
until December 2014, having joined the company
in 1975. Formerly a Non-Executive Director
of ITT Corporation.
Appointed: 2009
Nationality: Dutch
Other appointments: Member of the Supervisory
Boards of Aegon NV, TomTom NV, Koninklijke
FrieslandCampina NV and Royal Imtech NV.
Past appointments: Chairman of the Executive
Board of KPMG in the Netherlands and a
member of the Management Committee of the
KPMG International board until his retirement
in 2008, having joined KPMG in 1976. Formerly a
member of the Supervisory Board of Siemens
Nederland NV.
A Audit Committees: RELX Group plc, Reed Elsevier
PLC and Reed Elsevier NV
R Remuneration Committee: RELX Group plc
N Nominations Committee: joint Reed Elsevier PLC
and Reed Elsevier NV
C Corporate Governance Committee: joint Reed
Elsevier PLC and Reed Elsevier NV
Both of the Executive Directors are directors of
RELX Group plc, Reed Elsevier PLC and
Reed Elsevier NV.
Marike van Lier Lels is a Non-Executive Director of
Reed Elsevier NV. All of the other Non-Executive
Directors are directors of RELX Group plc, Reed
Elsevier PLC and Reed Elsevier NV.
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64
GOVERNANCE
BUSINESS LEADERS
RELX Group Business Leaders
Senior Business Executives
Mark Kelsey
Chief Executive Officer
Risk & Business Information
Mike Rusbridge
Chairman
Exhibitions
Mike Walsh
Chief Executive Officer
Legal
Ron Mobed
Chief Executive Officer
Scientific, Technical & Medical
Joined in 1989. Appointed CEO
Business Information in 2010 and
CEO Risk Solutions 2012.
Has held a number of senior
positions across the Group over the
past 30 years. Studied at Liverpool
University and received his MBA
from Bradford University.
Joined in 1994. Appointed to
current position in 1996.
Joined in 2003. Appointed to
current position in 2011.
Joined in 2011. Appointed to
current position in 2012.
Previously President of Reed
Exhibitions Europe and Asia and
President Reed Exhibitions North
America. Prior to that worked with
leading US exhibition organiser,
Clapp and Poliak. Studied at
Manchester University and
Harvard Business School.
Previously CEO of LexisNexis US
Legal Markets and Director of
Strategic Business Development
Home Depot. Prior to that was a
practising attorney at Weil, Gotshal
and Manges in Washington D.C. and
served as a consultant with The
Boston Consulting Group. Holds a
Juris Doctor degree from Harvard
Law School and is a graduate of
Yale University.
Previously President of Cengage
Learning’s Academic &
Professional Group and
Co-President and Co-Chief
Operating Officer with information
services company, IHS. Holds a
degree from Trinity College,
Cambridge and a master’s degree
from Imperial College, London.
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RELX Group Annual Reports and Financial Statements 2014
65
Corporate Executives
Ian Fraser
Human Resources Director
Kumsal Bayazit
Chief Strategy Officer
Youngsuk “YS” Chi
Director of Corporate Affairs and
Chairman Elsevier
Henry Udow
Chief Legal Officer and
Company Secretary
Joined in 2005. Appointed to
current position at that time.
Joined in 2004. Appointed to
current position in 2012.
Joined in 2005. Appointed to
current position in 2011.
Joined in 2011. Appointed to
current position at that time.
Previously Global HR Director at
BHP Billiton (1998 to 2005). Holds
an MBA in Finance and
International Business from
London’s City University and an MA
from Edinburgh University. Ian is
also a Chartered Psychologist.
Previously Executive Vice
President of Global Strategy and
Business Development for
LexisNexis Legal and Professional.
Prior to that she worked with Bain
& Company in New York, Los
Angeles, Johannesburg and
Sydney. Holds an MBA from
Harvard Business School and is a
Graduate of the University of
California at Berkeley.
Previously he was President and
Chief Operating Officer of Random
House, founding Chairman of
Random House Asia and Chief
Operating Officer for Ingram
Book Group. Holds an MBA from
Columbia University and is a
Graduate of Princeton University.
Previously Chief Legal Officer and
Company Secretary of Cadbury plc
having spent 23 years working with
the company. Prior to that he
worked at Shearman & Sterling in
New York and London. Holds a
Juris Doctor degree from the
University of Michigan Law School
and a bachelor’s degree from the
University of Rochester.
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66
GOVERNANCE
CORPORATE GOVERNANCE
Chairman’s introduction to Corporate Governance
“ As we evolve and transform
our businesses, we are proposing
to simplify and modernise our
corporate structure to promote
greater transparency of
shareholders’ economic interests
in the combined businesses of
the Group.”
Introduction to Corporate Governance
The Boards of Reed Elsevier PLC, Reed Elsevier NV and
RELX Group plc are committed to high standards of corporate
governance and believe that such standards are integral to the
success of the Group. Our corporate governance arrangements
have been updated periodically to ensure they reflect best
practice as it has developed. The corporate structure has served
the Group well to date, but as the businesses have evolved under
our strategy to become an information solutions provider, the
Boards considered it an appropriate time to undertake a review of
the corporate structure to ensure it remains appropriate for the
modern operating environment. The Directors are proposing
certain changes which are designed to promote greater
transparency of shareholders’ economic interests in the
combined businesses and comparability between both parent
companies’ share prices. Importantly, these changes do not affect
the economic interests or voting rights of any shareholder.
Dividend and capital rights are unchanged. A detailed description
of the proposed changes is set out in this introduction.
The Boards have also put in place policies and procedures that
promote corporate responsibility, accountability and probity, and
include the Group’s Code of Ethics and Business Conduct which sets
the standard for our corporate and individual behaviour. The Code
of Ethics and Business Conduct applies to all Directors and
employees of the Group and more information on its application
can be found in the Corporate Responsibility section on page 41.
The Group is listed in the UK, the US and the Netherlands and
therefore it is subject to corporate governance requirements in
those jurisdictions. This Corporate Governance Report describes
the Group’s governance arrangements and the work of the Boards
and their Committees. It is intended to provide shareholders with
a clear view of how the Group has complied with the applicable
corporate governance codes during the year. Statements with
regard to compliance with corporate governance codes and in
particular the UK Corporate Governance Code published by the
Financial Reporting Council in September 2012 (the UK Code)
are set out on page 68.
Board changes and succession
In last year’s introduction to Corporate Governance, I reported
that Nick Luff had been identified to succeed Duncan Palmer as
Chief Financial Officer at a date which was to be determined. I am
pleased to report that shareholders approved Nick’s appointment
at the Annual General Meetings in 2014 and he joined the Boards
as Chief Financial Officer in September. Duncan stood down from
the Boards in September. I would like to welcome Nick to our
Boards and to thank Duncan for his contribution to the Group.
Looking ahead, Lisa Hook, our Senior Independent Director, will
have served for nine years as a Non-Executive Director as of this
year’s Annual General Meetings. Lisa has kindly agreed to serve
for a further term of one year to provide continuity while the
Nominations Committee leads the process for refreshing the
Boards and to ensure there is a smooth transition of responsibilities.
I am grateful to Lisa for agreeing to this. Further details of the work
of the Nominations Committee are set out in the report on page 74.
Board evaluation
An externally facilitated evaluation of the Boards and their
Committees was last undertaken in 2011. In accordance with the
UK Code, the Corporate Governance Committee appointed an
external facilitator, Lorna Parker, to conduct an independent
effectiveness review for 2014. Details of the review, which
confirmed that the Boards and their Committees continue to
function effectively, are set out on page 69.
Following the changes to the Boards during the year and taking
into account the outcome of the effectiveness review, I believe that
the Boards and the Committees operate effectively and have an
appropriate balance of skills, experience, independence, knowledge
of the Group and diversity to ensure that they continue to do so.
Additionally, all of our Directors continue to contribute effectively
and are committed to their roles. Therefore, on the recommendation
of the Nominations Committee, they will all stand for re-election
at the Annual General Meetings in April 2015. The biographical
details of each of the Directors are set out on pages 62 and 63.
Simplified, Modernised and More Transparent Corporate
Structure, Equalisation Arrangements and Corporate
Entity Names
During 2014, the Boards carried out a review of the Group’s
corporate structure, share listings, equalisation arrangements
and corporate entity names to explore ways in which they might be
simplified and modernised. Certain changes have recently been
made and others are being proposed to shareholders at the
Annual General Meetings of Reed Elsevier PLC and Reed Elsevier
NV to be held in April 2015. These changes will be cost and profit
neutral and none of these changes impact the economic or voting
interests of any shareholder. In particular, dividend and capital
distribution rights are unaffected. All parent company guarantees
over debt are also unaffected.
Corporate Structure
Reed Elsevier PLC and Reed Elsevier NV are separate,
publicly-held companies. Through the end of 2014 they jointly
owned two companies, Reed Elsevier Group plc and Elsevier Reed
Finance BV. Effective 25 February 2015, Reed Elsevier PLC and
Reed Elsevier NV transferred their direct ownership interests in
Elsevier Reed Finance BV to their jointly owned company Reed
Elsevier Group plc and named this newly-combined single group
entity RELX Group plc. As a result, RELX Group plc now holds all
the Group’s businesses, subsidiaries and financing activities.
Together Reed Elsevier PLC, Reed Elsevier NV and RELX Group plc
(and its subsidiaries and joint ventures) comprise the Reed
Elsevier combined businesses.
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RELX Group Annual Reports and Financial Statements 2014
67
Shareholders in Reed Elsevier PLC, the London (and New York) publicly listed entity, hold a 52.9% economic interest in the combined
businesses. Reed Elsevier PLC owns a 50% direct holding in RELX Group plc and has a 5.8% shareholding in Reed Elsevier NV, the
Amsterdam (and New York) publicly listed entity. All other shareholders (other than Reed Elsevier PLC) in Reed Elsevier NV hold a 47.1%
economic interest in the combined businesses. In order to simplify the corporate structure and make the respective economic interests
of the two parent companies’ shareholders more transparent it is being proposed that Reed Elsevier PLC’s 5.8% shareholding in Reed
Elsevier NV be replaced by a 2.9% direct (non-voting) shareholding in RELX Group plc. As a result, Reed Elsevier PLC’s direct equity holding
in RELX Group plc will become 52.9% and Reed Elsevier NV’s direct equity holding in RELX Group plc will become 47.1%, which aligns with
their shareholders’ respective economic interests.
Simplification of Corporate Structure
Revised corporate structure, reflecting the changes that became effective 25 February 2015 and those being proposed to shareholders:
External shareholders’
economic interest in the
Reed Elsevier combined
businesses:
31 December 2014
25 February 2015
Proposed 1 July 2015
52.9%
47.1%
52.9%
47.1%
Reed
Elsevier
PLC
Reed
Elsevier
NV
Reed Elsevier Group plc
Elsevier Reed Finance BV
52.9%
RELX
PLC
47.1%
RELX
NV
Reed
Elsevier
NV
5.8%
Reed
Elsevier
PLC
50%
50%
52.9%*
47.1%*
RELX Group plc
RELX Group plc
*These percentages reflect the respective equity interests of Reed Elsevier PLC and Reed Elsevier NV in RELX Group plc, subject to
shareholder approval. Reed Elsevier PLC and Reed Elsevier NV will each continue to have equal voting rights in RELX Group plc, thus
retaining the current 50%/50% joint voting control of the combined businesses.
Equalisation Arrangements
Presently the equalisation ratio of Reed Elsevier PLC to Reed
Elsevier NV shares is such that one Reed Elsevier NV ordinary
share is generally intended to confer equivalent economic
interests to 1.538 Reed Elsevier PLC ordinary shares. At its
Annual General Meeting in April 2015, Reed Elsevier NV is
proposing a resolution to issue additional bonus ordinary shares
to existing Reed Elsevier NV shareholders on the basis of 0.538
bonus shares for each share held. If approved by shareholders,
this will result in one ordinary share of Reed Elsevier NV
conferring equivalent economic interests to one ordinary share
of Reed Elsevier PLC. The reduction in the per share economic
interests of Reed Elsevier NV shareholders as a result of the
increase in the number of Reed Elsevier NV shares will be
correspondingly offset by the number of additional shares each
Reed Elsevier NV shareholder receives in the bonus issue, leaving
the economic interest of each shareholder unchanged. Reed
Elsevier PLC and Reed Elsevier NV ADRs on the New York Stock
Exchange will also be adjusted so that they each represent one
Reed Elsevier PLC or one Reed Elsevier NV ordinary share (from
their current 4 to 1 and 2 to 1 ratios) respectively.
By moving from the current 1.538 to 1 to a new 1 to 1 equalisation
ratio between Reed Elsevier PLC and Reed Elsevier NV ordinary
shares, capital rights (on a per share basis), dividends per share
(on a gross basis including, with respect to the dividend on Reed
Elsevier PLC ordinary shares, the associated UK tax credit) and
adjusted earnings per share all will be readily identifiable as
substantially equivalent between ordinary shares as well as their
respective ADRs , subject only to the prevailing currency
exchange rates between pounds sterling, euros or US dollars.
This will also make it simpler to compare the prices of Reed
Elsevier PLC and Reed Elsevier NV ordinary shares as well as
their respective ADRs.
Subject to shareholder approval of the issuance of additional
bonus shares by Reed Elsevier NV, the bonus issue, the changes to
the number of Reed Elsevier PLC and Reed Elsevier NV ADRs and
the requisite amendments to the Governing Agreement, will all be
effective as of 1 July 2015.
Corporate Entity Names
Along with the simplification and modernisation of the corporate
structure, the Boards undertook a review of the names of the
corporate entities. Following that review, as already noted, the
Boards determined that as part of the transfer of ownership of
Elsevier Reed Finance BV from Reed Elsevier PLC and Reed
Elsevier NV to Reed Elsevier Group plc it was appropriate to name
the newly-combined single group entity that holds all businesses,
subsidiaries and financing activities, RELX Group plc. The Boards
believe this shorter and more modern name reflects the
transformation of the Company to a technology, content and
analytics driven business while at the same time maintaining the
link with its proud heritage. The Boards are proposing to
shareholders at the Annual General Meetings in 2015 to also change
the corporate names of Reed Elsevier PLC and Reed Elsevier NV to
RELX PLC and RELX NV, respectively. There will not be any brand or
name changes for any customer-facing products or business units.
Shareholder Approval
As noted, certain of the structural changes and the change of name
of the two parent companies, Reed Elsevier PLC and Reed Elsevier
NV, will require the approval of shareholders. A more detailed
description of the resolutions to be put to the Annual General
Meetings of Reed Elsevier PLC and Reed Elsevier NV in April 2015
are set out in the respective Notices of Annual General Meeting.
Anthony Habgood
Chairman
25 February 2015
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68
GOVERNANCE
CORPORATE GOVERNANCE
Corporate Governance
Compliance with codes of best practice
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
implemented standards of corporate governance and disclosure
policies applicable to companies listed on the stock exchanges of
the UK, the US and the Netherlands. The effect of this is that a
standard applying to one will, where not in conflict, also be
observed by the other.
The Boards of Reed Elsevier PLC and Reed Elsevier NV support
the principles and provisions of corporate governance contained
in the UK Corporate Governance Code issued by the Financial
Reporting Council (FRC) in September 2012 (the UK Code) and
those contained in the Dutch Corporate Governance Code issued
in December 2008 (the Dutch Code). The FRC published a revised
UK Corporate Governance Code in September 2014 (the 2014
Code) which applies to accounting periods beginning on or after
1 October 2014. The Boards expect to comply in full with the 2014
Code during 2015.
This report and the Compliance statement set out below are made
in relation to the UK Code. The principles and provisions set out in
the UK Code and the Dutch Code have applied throughout the
financial year ended 31 December 2014. Reed Elsevier PLC,
which has its primary listing on the London Stock Exchange, has
complied throughout the year with the UK Code. Reed Elsevier NV,
which has its primary listing on the Euronext Amsterdam Stock
Exchange, has also complied throughout the year with the UK
Code, and subject to limited exceptions, as explained in the Reed
Elsevier NV Report of the Board on pages 167 and 168, has applied
the best practice provisions of the Dutch Code. The ways in which
Reed Elsevier PLC and Reed Elsevier NV have applied the main
principles of the UK Code are described below. For further
information on the application of the Dutch Code by Reed Elsevier
NV, see the Corporate Governance Statement of Reed Elsevier NV
published on the website, www.relxgroup.com.
Business model
As required by Provision C.1.2 of the UK Code, pages 2 to 60
describe the business and the progress made in 2014 against the
Group’s long-term business priorities, aimed at delivering better
outcomes for our customers and creating value for the Group
and shareholders.
Shareholder engagement
Reed Elsevier PLC and Reed Elsevier NV participate in regular
dialogue with institutional shareholders. Presentations on the
combined businesses are made by the Chairman, Chief Executive
Officer and Chief Financial Officer following the announcement
of the interim and full-year results and these are simultaneously
webcast. A conference call with investors was also held following
the third quarter Interim Management Statement. The Chief
Executive Officer, the Chief Financial Officer and the investor
relations team meet institutional shareholders on a regular
basis and the Chairman also makes himself available to major
institutions as appropriate. A trading update is provided ahead of
the Annual General Meetings of the two companies and towards
the end of the financial year through Interim Management
Statements. The interim and annual results announcements and
presentations, together with the Interim Management Statements,
other important announcements and corporate governance
documents concerning the Group, are published on the website,
www.relxgroup.com. In accordance with the provisions of the
Dutch Code, Reed Elsevier NV has adopted a bilateral shareholder
contact policy, which is also published on the website. The Boards
of Reed Elsevier PLC and Reed Elsevier NV commission periodic
reports on the attitudes and views of the companies’
institutional shareholders and the results are presented to the
respective Boards.
Both Reed Elsevier PLC and Reed Elsevier NV offer electronic
voting facilities in relation to proxy voting at shareholder meetings.
The Annual General Meetings provide an opportunity for the
Boards to communicate with individual shareholders. The
Chairman, the Chief Executive Officer, the Chief Financial Officer,
the chairmen of the Board Committees, other Directors and a
representative of the external auditors are available to answer
questions from shareholders.
Board induction and information
Following appointment and as required, Directors receive training
appropriate to their level of experience and knowledge. This
includes the provision of a comprehensive briefing pack and a
tailored induction programme so as to provide newly-appointed
Directors with information about the Group’s businesses and
other relevant information to assist them in performing their
duties. Non-Executive Directors are encouraged to visit the
Group’s businesses to meet management and senior staff.
Since joining the Group as Chief Financial Officer, Nick Luff has
undertaken an extensive induction programme, designed to ensure
familiarisation with the Group’s businesses, people, and governance
and control processes. This programme has included site visits to
the Group’s operating businesses, internal briefings from senior
management and their teams, and external meetings with
corporate advisers and major investors. Mr Luff’s familiarisation
programme will continue in the coming year with further site visits
and meetings with senior management and advisers.
All Directors have full and timely access to the information
required to discharge their responsibilities fully and efficiently.
They have access to the services of the respective company
secretaries, other members of the Group’s management and
staff, and external advisers. Directors may take independent
professional advice in the furtherance of their duties, at the
relevant company’s expense.
In addition to scheduled Board and Board Committee meetings
held during the year, the Directors attend other meetings and site
visits. Where a Director is unable to attend a Board or Board
Committee meeting he or she is provided with all relevant papers
and information relating to that meeting and is able to discuss
issues arising with the respective chairman and other Board and
Committee members.
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RELX Group Annual Reports and Financial Statements 2014
69
Board evaluation
In 2014, the Corporate Governance Committee appointed an
external facilitator to carry out an independent effectiveness
review of the Boards and their Committees. The facilitator was
Lorna Parker, an independent practitioner with no other
connection to the Group. Ms Parker’s review took the form of
structured interviews with Directors and the company
secretaries, supported by individual questionnaires completed
by all participants. Access to Board and Committee papers for
the prior 12 months was provided to Ms Parker.
The review explored key areas, including:
Board performance and effectiveness of decision-making
Board composition and succession planning
Talent management and executive leadership succession
Risk management, corporate governance and compliance
Agenda planning and quality of information provided
by management
Committee effectiveness
The principal findings and recommendations from the review
were discussed with the Chairman and Senior Independent
Director, following which they were presented to a meeting of
the Boards.
The review of the performance of the Chairman of the Boards was
led by the Senior Independent Director. The Chairman of the
Boards was not present during a discussion by the Non-Executive
Directors as it related to him.
The review confirmed that overall, the Directors believe that the
Boards remain effective, are committed and engaged with a
diverse mix of complementary and relevant skills and
perspectives. Themes demonstrating the effectiveness of the
Boards included: alignment on strategy, objectives, risks and the
role of the Boards; well-structured meeting agendas with good
allocation of Board time; efficient and thorough Board processes;
and well-chaired Committees with good linkages to the Boards.
All Directors commented on the Chairman’s effective style, noting
he continues to foster a supportive and cohesive yet disciplined
culture that encourages open dialogue. Areas for Board focus in
2015 included further refining the Boards’ time allocation,
increasing its involvement in talent management, and continuing
its engagement with individual business areas and their strategies
through senior management dialogue.
Based on the findings of the external effectiveness review, the
Corporate Governance Committee believes that the Boards and
their Committees function effectively and collaboratively and with
an appropriate level of engagement with management. The
Committee also believes that the performance of each Director
continues to be effective and that they demonstrate commitment
to their respective roles. The review confirmed that good progress
is being made in response to the prior year’s recommendations to
ensure that the Boards continue to monitor the level of detail
provided to and balance of focus by the Boards between financial
data and strategic matters.
Areas of significant skills and expertise of the Non-Executive Directors on the Boards
Knowledge of corporate governance issues for listed companies
Operational experience in the Group’s main geographical markets
Management of human resources, selection and remuneration of executives
Corporate responsibility
Corporate strategy and organisation
Marketing, customer relations
Legal matters
Financial and organisational audit
Executive board experience in a large international listed company
Operational experience with telecommunications/information technology, electronic publishing
Operational experience in the Group’s product markets
Banking, tax and corporate finance
Percentage of the
Non-Executive Directors
100
100
100
100
100
88
88
75
63
63
38
38
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70
GOVERNANCE
CORPORATE GOVERNANCE
The Boards
The Boards of Reed Elsevier PLC, Reed Elsevier NV and RELX
Group plc are harmonised. All of the Directors of RELX Group plc
are also Directors of Reed Elsevier PLC and Reed Elsevier NV.
Reed Elsevier NV may nominate for appointment to the Board up to
two Non-Executive Directors who are not appointed to the Boards
of either Reed Elsevier PLC or RELX Group plc. Currently, one
such Director, Marike van Lier Lels, has been appointed to the
Board of Reed Elsevier NV. The names, nationalities and
biographical details of each Director at the date of this report
appear on pages 62 and 63.
The Boards of Reed Elsevier PLC, Reed Elsevier NV and RELX
Group plc are unitary boards. The implementation of a unitary
board structure at Reed Elsevier NV was approved at its Annual
General Meeting in April 2013, following the enactment of
legislation to formalise the unitary board governance structure in
the Netherlands Civil Code.
There is a schedule of matters reserved to the Boards and
approved delegated authorities to the Chief Executive Officer
and other senior executives. There is a clear separation of the
roles of the Chairman and the Chief Executive Officer which are
set out in writing.
The Boards of Reed Elsevier PLC, Reed Elsevier NV, RELX Group plc
(and, with respect to Elsevier Reed Finance BV, until the transfer
of its ownership to RELX Group plc on 25 February 2015) each
comprise a balance of Executive and Non-Executive Directors who
bring a wide range of skills and experience to the deliberations of
the Boards. The Boards of Reed Elsevier PLC and Reed Elsevier
NV review the independence of the Non-Executive Directors every
year, based on the criteria for independence set out in the UK Code.
The UK Code does not consider the Chairman to be independent
due to the unique role he has in corporate governance.
Notwithstanding this, Anthony Habgood met the independence
criteria contained in the UK Code when he was appointed
Chairman in 2009. The Boards consider all Non-Executive
Directors (other than the Chairman) to be independent of
management and free from any business or other relationship
which could materially interfere with their ability to exercise
independent judgement.
Notwithstanding that Lisa Hook will, at the time of the forthcoming
Annual General Meetings, have served on the Boards for nine
years, she will stand for re-election and, if re-elected, will serve
for a further term of one year. The Boards have determined that
Ms Hook remains independent in character and judgement
despite her length of service and there are no relationships or
circumstances which are likely to affect her independent
judgement. The Boards believe that this will allow for an orderly
transition of responsibilities.
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
appointed Lisa Hook to act as Senior Independent Director, who is
available to meet with institutional shareholders and assist in
resolving concerns in cases where alternative channels are
deemed inappropriate. The Senior Independent Director also leads
the annual assessment of the performance of the Chairman of
Reed Elsevier PLC and Reed Elsevier NV. A profile, which identifies
the skills and experience of the Non-Executive Directors of Reed
Elsevier PLC and Reed Elsevier NV, is set out on page 69 and is
available on the website, www.relxgroup.com.
Reed Elsevier PLC and Reed Elsevier NV shareholders maintain
their rights to appoint individuals to the respective Boards in
accordance with the provisions of the articles of association of
these companies. Subject to this, no individual may be appointed
to the Boards of Reed Elsevier PLC, Reed Elsevier NV or
RELX Group plc unless recommended by the joint Nominations
Committee. Members of the Committee abstain when their own
re-appointment is being considered.
As a general rule, letters of appointment in respect of
Non-Executive Directors of Reed Elsevier PLC and Reed Elsevier
NV provide that individuals will serve for an initial term of three
years, and are typically expected to serve two three-year terms,
although the Boards may invite an individual to serve for an
additional period of three years.
The respective articles of association of Reed Elsevier PLC and
Reed Elsevier NV provide that all Directors should be subject to
retirement at least every three years and are then able to make
themselves available for re-election by shareholders at
subsequent Annual General Meetings. Notwithstanding the
provisions of the articles of association, it is the Boards’ policy to
comply with the recommendations contained in the UK Code, and
all Directors will seek re-election by shareholders annually.
Board changes
Changes during the year in the composition of the Boards of
Reed Elsevier PLC, Reed Elsevier NV and RELX Group plc are
set out in the table on page 71.
Having given notice of his resignation in 2013, Duncan Palmer
stepped down as Chief Financial Officer and as a Director during
September 2014. At the time of his resignation, the Nominations
Committee retained an external search consultancy to conduct a
rigorous search process in conjunction with the Boards to identify
a suitable candidate to succeed Mr Palmer. Following the
conclusion of the search process and on the recommendation of
the Nominations Committee, the Boards selected Nick Luff and
recommended his election to shareholders. Mr Luff’s election
was approved by shareholders at the Annual General Meetings in
April 2014 and he joined the Boards as Chief Financial Officer on
1 September 2014. His biography is set out on page 62.
In accordance with the UK Code, all Directors will retire from the
Boards of Reed Elsevier NV and Reed Elsevier PLC at the
respective Annual General Meetings and, being eligible, will offer
themselves for re-election. Based on the review of performance
and effectiveness made by the Corporate Governance Committee
of each individual seeking re-election, the Boards have accepted a
recommendation from the Nominations Committee that each
Director be proposed for re-election at the 2015 Annual General
Meeting of the respective company.
In accordance with the articles of association of Reed Elsevier
PLC, Directors are normally subject to election by shareholders at
the first Annual General Meeting following their appointment by
the Board.
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RELX Group Annual Reports and Financial Statements 2014
71
Board Attendance
Audit Committees
The Boards of Reed Elsevier PLC, Reed Elsevier NV and
RELX Group plc have established Audit Committees. The
Committees comprise only independent Non-Executive
Directors and are chaired by Ben van der Veer. A report of the
Audit Committees, setting out their role and main activities
during the year, appears on pages 89 and 90.
Ben van der Veer (Committee Chairman)
Adrian Hennah
Linda Sanford
5/5
5/5
5/5
The functions of an audit committee in respect of the financing
activities were carried out by the Supervisory Board of Elsevier
Reed Finance BV.
Remuneration Committee
The Board of RELX Group plc has established a Remuneration
Committee, which is responsible for considering the remuneration
of the Executive Directors and the Chairman. The Committee
comprises only Non-Executive Directors and is chaired by
Wolfhart Hauser. A Directors’ Remuneration Report, which has
been approved by the Boards of RELX Group plc, Reed Elsevier PLC
and Reed Elsevier NV, appears on pages 75 to 88. This report
serves as disclosure of the Annual Remuneration Report which
contains the remuneration of the Directors and their interests in
the shares of the two parent companies, Reed Elsevier PLC and
Reed Elsevier NV.
Wolfhart Hauser (Committee Chairman)
Anthony Habgood
Lisa Hook
Robert Polet
3/3
3/3
3/3
2/3
Nominations Committee
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
established a joint Nominations Committee. The Committee
comprises only Non-Executive Directors, and is chaired by
Anthony Habgood. A report of the Nominations Committee, setting
out its role and main activities during the year, appears on page 74.
Anthony Habgood (Committee Chairman)
Lisa Hook
Ben van der Veer
4/4
4/4
4/4
The following tables show the attendance of Directors at Board
meetings for the year. Attendance is expressed as the number of
meetings attended out of the number eligible to be attended.
Reed Elsevier
PLC
Reed Elsevier
NV
RELX Group
plc
Anthony Habgood (Chairman)
Erik Engstrom
Nick Luff (1)
Wolfhart Hauser
Adrian Hennah
Lisa Hook
Marike van Lier Lels (2)
Duncan Palmer (3)
Robert Polet
Linda Sanford
Ben van der Veer
6/6
6/6
2/2
6/6
5/6
6/6
6/6
4/4
4/6
6/6
6/6
6/6
6/6
2/2
6/6
5/6
6/6
6/6
4/4
4/6
6/6
6/6
7/7
7/7
3/3
7/7
6/7
7/7
7/7
4/4
5/7
6/7
7/7
(1) Appointed to the Boards on 1 September 2014
(2) As a Reed Elsevier NV Director, Ms van Lier Lels attended the Board meetings of
Reed Elsevier PLC and RELX Group plc; however, she is not a Director of those
companies, is not counted in the quorum and does not vote on matters relating to
those companies
(3) Resigned from the Boards on 24 September 2014
Throughout 2014, Elsevier Reed Finance BV had a two-tier board
structure comprising a Supervisory Board and a Management
Board. The Supervisory Board was chaired by Marike van Lier Lels
who succeeded Rudolf van den Brink as Chairman in July 2014
and, in addition, consisted of Nick Luff and Ben van der Veer.
The Management Board consisted of Gerben de Jong,
Alberto Romaneschi and Jans van der Woude.
Rudolf van den Brink (1)
Gerben de Jong
Marike van Lier Lels
Nick Luff (2)
Duncan Palmer (3)
Alberto Romaneschi
Ben van der Veer
Jans van der Woude
Elsevier Reed Finance BV
2/2
3/3
3/3
1/1
2/2
3/3
3/3
3/3
(1) Resigned from the Supervisory Board on 21 July 2014
(2) Appointed to the Supervisory Board on 1 September 2014
(3) Resigned from the Supervisory Board on 24 September 2014
Board Committees
In accordance with the principles of good corporate governance,
the following Committees have been established by the respective
Boards. All of the Committees have written terms of reference, which
are published on the website, www.relxgroup.com. Membership of
each Committee and attendance during the year are set out below.
Attendance is expressed as the number of meetings attended out
of the number eligible to be attended.
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72
GOVERNANCE
CORPORATE GOVERNANCE
Corporate Governance Committee
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
established a joint Corporate Governance Committee, which is
responsible for reviewing ongoing developments and best
practice in corporate governance. The Committee is also
responsible for assessing the performance of the Directors and
recommending the structure and operation of the various
Committees of the Boards and the qualifications and criteria for
membership of each committee. The Committee comprises only
Non-Executive Directors and is chaired by Anthony Habgood.
Anthony Habgood (Committee Chairman)
Wolfhart Hauser
Adrian Hennah
Lisa Hook
Marike van Lier Lels
Robert Polet
Linda Sanford
Ben van der Veer
5/5
5/5
5/5
5/5
5/5
5/5
4/5
5/5
Internal control
Parent companies
The Boards of Reed Elsevier PLC and Reed Elsevier NV have each
adopted a schedule of matters which are required to be brought to
them for decision. During 2014 the Boards of Reed Elsevier PLC
and Reed Elsevier NV exercised independent supervisory roles
over the activities and systems of internal control of Reed Elsevier
Group plc and Elsevier Reed Finance BV. In relation to Reed
Elsevier Group plc and Elsevier Reed Finance BV, the Boards of
Reed Elsevier PLC and Reed Elsevier NV approved the strategy and
the annual budgets, and received regular reports on the
operations, including the treasury and risk management activities
of the two companies. Major transactions proposed by the Boards
of Reed Elsevier Group plc or Elsevier Reed Finance BV required
the approval of the Boards of both Reed Elsevier PLC and Reed
Elsevier NV.
The Reed Elsevier PLC and Reed Elsevier NV Audit Committees
met on a regular basis to review the systems of internal control
and risk management of Reed Elsevier Group plc and Elsevier
Reed Finance BV.
Effective 25 February, Reed Elsevier PLC and Reed Elsevier NV
transferred their direct ownership interests in Elsevier Reed
Finance BV to their jointly-owned company, Reed Elsevier Group
plc and named this newly combined single group entity RELX
Group plc. As a result, RELX Group plc now holds all businesses,
subsidiaries and financing activities (including Elsevier Reed
Finance BV).
In the future, Elsevier Reed Finance BV and its subsidiaries will be
subject to the framework of procedures and controls established
by RELX Group plc and the Audit Committee of RELX Group plc
will review, on a regular basis, the system of internal control and
risk management of Elsevier Reed Finance BV and its
subsidiaries.
Operating companies
The Board of RELX Group plc is responsible for the system of
internal control of the the Group and reviewing the effectiveness
of such systems. While the Boards of Elsevier Reed Finance BV
were responsible for the system of internal control in respect
of the finance group activities during 2014 and reviewing the
effectiveness of such systems, the responsibility transferred
to RELX Group plc with effect from 25 February 2015.
The Boards of Reed Elsevier Group plc and Elsevier Reed Finance BV
each implemented an ongoing process for identifying, evaluating,
monitoring and managing the principal risks faced by their
respective businesses. These processes were in place throughout
the year ended 31 December 2014 and up to the date of the
approvals of the Annual Reports and Financial Statements 2014.
RELX Group plc
RELX Group plc has an established framework of procedures and
internal controls, with which the management of each business is
required to comply. Group businesses are required to maintain
systems of internal control which are appropriate to the nature
and scale of their activities and address all significant strategic,
operational, financial and legal compliance risks that they face.
The Board of RELX Group plc has adopted a schedule of matters
that are required to be brought to it for decision.
RELX Group plc has a Code of Ethics and Business Conduct that
provides a guide for achieving its business goals and requires
officers and employees to behave in an open, honest, ethical and
principled manner. The Code also outlines confidential
procedures enabling employees to report any concerns about
compliance, or about the Group’s financial reporting practice.
The Code is published on the website, www.relxgroup.com.
Each business area has identified and evaluated its principal risks,
the controls in place to manage those risks and the levels of
residual risk accepted. Risk management and control procedures
are embedded into the operations of the business and include the
monitoring of progress in areas for improvement that come to
management and board attention. The principal risks facing the
Group are set out on pages 58 to 60.
The principal risks facing the RELX Group plc businesses are
regularly reported to and assessed by the Board and Audit
Committee. With the close involvement of business management
and central functions, the risk management and control
procedures ensure that the Group is managing its business risks
effectively and in a co-ordinated manner across the business with
clarity on the respective responsibilities and interdependencies.
Litigation and other legal regulatory matters are managed by
legal directors in Europe and the US.
The RELX Group plc Audit Committee receives regular reports on
the identification and management of material risks and reviews
these reports. The Audit Committee also receives regular reports
from both internal and external auditors on internal control and
risk management matters. In addition, each business area is
required, at the end of the financial year, to review the
effectiveness of internal controls and risk management and
report its findings on a detailed basis to the management of RELX
Group plc. These reports are summarised and, as part of the
annual review of effectiveness, submitted to the Audit Committee
of RELX Group plc. The Chairman of the Audit Committee reports
to the Board on any significant internal control matters arising.
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RELX Group Annual Reports and Financial Statements 2014
73
Elsevier Reed Finance BV
During 2014, Elsevier Reed Finance BV had established policy
guidelines, which were applied to all Elsevier Reed Finance BV
companies. The respective Boards of Elsevier Reed Finance BV
adopted schedules of matters required to be brought to them for
decision. Procedures are in place for monitoring the activities of
the finance group, including a comprehensive treasury reporting
system. The principal risks affecting the finance group have been
identified and evaluated and are subject to regular review. The
controls in place to manage these risks and the level of residual
risk accepted were monitored by the Boards. In future, these will
be monitored by the Audit Committee of RELX Group plc.
Annual review
As part of the year-end procedures, the Audit Committees and
Boards of Reed Elsevier PLC, Reed Elsevier NV, RELX Group plc
and Elsevier Reed Finance BV reviewed the effectiveness of the
systems of internal control and risk management during the last
financial year. The objective of these systems is to manage, rather
than eliminate, the risk of failure to achieve business objectives.
Accordingly, they can only provide reasonable, but not absolute,
assurance against material misstatement or loss. The Boards
have confirmed, subject to the above, that as regards financial
reporting risks, the respective risk management and control
systems provide reasonable assurance against material
inaccuracies or loss and have functioned properly during the year.
Responsibilities in respect of the
financial statements
The Directors of Reed Elsevier PLC, Reed Elsevier NV, RELX
Group plc and Elsevier Reed Finance BV are required to prepare
financial statements as at the end of each financial period, in
accordance with applicable law and regulations, which give a true
and fair view of the state of affairs, and of the profit or loss, of the
respective companies and their subsidiaries, joint ventures and
associates. They are responsible for maintaining proper accounting
records, for safeguarding assets, and for taking reasonable steps
to prevent and detect fraud and other irregularities. The Directors
are also responsible for selecting suitable accounting policies and
applying them on a consistent basis, making judgements and
estimates that are prudent and reasonable.
Applicable accounting standards have been followed and the
Reed Elsevier combined financial statements, which are the
responsibility of the Directors of Reed Elsevier PLC and Reed
Elsevier NV, are prepared using accounting policies which comply
with International Financial Reporting Standards.
Having taken into account all the matters considered by the
Boards and brought to the attention of the Boards, the Directors
are satisfied that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the company’s
performance, business model and strategy.
Going concern
The Directors of Reed Elsevier PLC and Reed Elsevier NV, having
made appropriate enquiries, consider that adequate resources
exist for the combined businesses to continue in operational
existence for the foreseeable future and that, therefore, it is
appropriate to adopt the going concern basis in preparing the 2014
financial statements. In reaching this conclusion, the Directors of
Reed Elsevier PLC and Reed Elsevier NV have had due regard to
the combined businesses’ financial position as at 31 December
2014, the strong free cash flow of the combined businesses, the
Group’s ability to access capital markets and the principal risks
facing the Group.
A commentary on the combined businesses’ cash flows, financial
position and liquidity for the year ended 31 December 2014 is set out
in the Chief Financial Officer’s report on pages 50 to 57. This shows
that after taking account of available cash resources and committed
bank facilities that back up short-term borrowings, all of the
Group’s borrowings that mature within the next two years can be
covered. The Group’s policies on liquidity, capital management and
management of risks relating to interest rate, foreign exchange and
credit exposures are set out on pages 120 to 123. The principal
risks facing the Group are set out on pages 58 to 60.
US certificates
As required by Section 302 of the US Sarbanes-Oxley Act 2002
and by related rules issued by the US Securities and Exchange
Commission, the Chief Executive Officer and Chief Financial
Officer of Reed Elsevier PLC and of Reed Elsevier NV certify in
the respective Annual Reports 2014 on Form 20-F to be filed with
the Commission that they are responsible for establishing and
maintaining disclosure controls and procedures and that they have:
designed such disclosure controls and procedures to ensure
that material information relating to the Group is made known
to them
evaluated the effectiveness of the Group’s disclosure controls
and procedures
based on their evaluation, disclosed to the Audit Committees
and the external auditors all significant deficiencies in the
design or operation of disclosure controls and procedures and
any frauds, whether or not material, that involve management
or other employees who have a significant role in the Group’s
internal controls; and
presented in the Reed Elsevier Annual Report 2014 on Form
20-F their conclusions about the effectiveness of the disclosure
controls and procedures
A Disclosure Committee, comprising the company secretaries of
Reed Elsevier PLC and Reed Elsevier NV and other senior
managers of the Group, provides assurance to the Chief Executive
Officer and Chief Financial Officer regarding their Section 302
certifications.
Section 404 of the US Sarbanes-Oxley Act 2002 requires the Chief
Executive Officer and Chief Financial Officer of Reed Elsevier PLC
and of Reed Elsevier NV to certify in the respective Annual Reports
2014 on Form 20-F that they are responsible for maintaining
adequate internal control structures and procedures for financial
reporting and to conduct an assessment of their effectiveness.
The conclusions of the assessment of internal control structures
and financial reporting procedures, which are unqualified, are
presented in the Reed Elsevier Annual Report 2014 on Form 20-F.
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74
GOVERNANCE
CORPORATE GOVERNANCE
Report of the Nominations Committee
This report has been prepared by the joint Nominations
Committee of Reed Elsevier PLC and Reed Elsevier NV and has
been approved by the respective Boards.
Committee membership
The Committee comprises only Non-Executive Directors, and is
chaired by Anthony Habgood. The other members are Lisa Hook
and Ben van der Veer. The Committee met four times during
the year.
Role of the Committee
The principal role of the Committee is to provide assistance to the
Boards of Reed Elsevier PLC, Reed Elsevier NV and RELX Group plc
by identifying individuals qualified to become Directors and
recommending to the Boards the appointment of such individuals.
The responsibilities of the Committee are set out in written terms
of reference (available at www.relxgroup.com) and include:
(i)
to keep under review the size and composition of the Boards
(ii)
to develop and agree the specification for the recruitment of
new directors
(iii) to procure the recruitment of new directors
(iv) to recommend to the Boards the appointment of candidates
subject, where appropriate, to the approval of shareholders
of Reed Elsevier PLC and Reed Elsevier NV
(v)
to recommend Directors to serve on the Committees of the
Boards, having regard to the criteria for service on each
committee as set out in the terms of reference for such
committees, and to recommend members to serve as the
Chair of those committees
(vi) to make recommendations to the Boards in relation to the
election or re-election of Directors at the Annual General
Meetings of Reed Elsevier PLC and Reed Elsevier NV; and
(vii) to review and make recommendations to the Boards in
relation to any Directors’ actual or potential conflicts of
interest
Composition of the Boards
During the year, the Committee focused on succession planning in
relation to the future retirement of long-serving Non-Executive
Directors from the Boards, to ensure that, as the Boards are
refreshed, an appropriate level of experience and knowledge of
the Group is maintained and to allow for an orderly transition of
responsibilities.
The Committee has established a formal, rigorous and
transparent procedure for the recruitment of candidates to the
Boards and recommendations by the Committee are made on the
basis of a candidate’s merit, against objective criteria and with due
regard for the benefits of diversity. The Committee undertook a
review of the composition of the Boards, focusing on the balance of
skills, experience, independence, knowledge of the Group and
diversity, including gender. The Committee also took into account
the Group’s strategy to transform the business into a professional
information solutions provider. Following that review, the
Committee drew up a profile of necessary attributes for potential
candidates as Non-Executive Directors.
The Committee also recommended to the Boards the re-election
of the Directors and in doing so took into account the outcome of
the Board evaluation. Details of the 2014 Board evaluation can be
found on page 69.
The Boards continued to meet their aspirational goals – set in
response to the Davies Review, “Women on Boards” – that the
Reed Elsevier NV Board would be comprised of 30% women and
the Reed Elsevier PLC Board would be comprised of 22% women.
During 2014, the Committee continued to monitor the composition
of the Boards against these aspirational goals while taking into
account the benefits of diversity more generally. Further details of
the Group’s approach to diversity and inclusion in its workforce
can be found in the Corporate Responsibility Report on page 42.
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RELX Group Annual Reports and Financial Statements 2014
75
Directors’ Remuneration Report
The Directors’ Remuneration Report (the Report) describes
how the Group applies the principles of good governance
relating to Directors’ remuneration. This Report has been
prepared by the Remuneration Committee of RELX Group plc in
accordance with the UK Corporate Governance Code, the UK
Listing Rules, the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013 (the UK Regulations) and the Dutch Corporate Governance
Code (the Dutch Code).
The Report was approved by the Boards of Reed Elsevier PLC,
Reed Elsevier NV and RELX Group plc. The Remuneration Policy
was approved by shareholders at the 2014 Annual General
Meeting of Reed Elsevier PLC for three years. The policy can be
found at http://www.relxgroup.com/go/remunerationpolicy or
on pages 79 to 85 of the 2013 Remuneration Report.
Reed Elsevier PLC shareholders will be invited to vote on our
2014 Annual Remuneration Report (by way of a non-binding
advisory vote) at the 2015 Annual General Meeting of Reed
Elsevier PLC.
The audited sections of the Report are clearly marked.
Introduction from Remuneration
Committee Chairman
As you will read elsewhere in this Annual Report, 2014 was
another good year of progress for the company. Management
continued to transform the business into a global professional
information solutions provider that delivers improved outcomes
for professional customers across industries. The business helps
customers make better decisions, get better results and be more
productive. This is achieved by leveraging a deep understanding of
the business' customers to create innovative solutions which
combine content and data with analytics and technology in global
platforms. Management continues to build leading positions in
long-term global growth markets, primarily through organic
investment supplemented by selective acquisitions where the
business is the natural owner and can accelerate the strategy with
good returns. It continues to divest assets that do not have the
potential for significant future value creation for the business.
By consistently following this strategy over a five-year period
management has improved the business profile of the Group and
the quality of earnings. This has led to more predictable revenues,
a higher growth profile and improving returns. This longer term
performance is reflected in the earnings per share (EPS), return
on invested capital (ROIC) and total shareholder return (TSR)
outcomes under the five-year Reed Elsevier Growth Plan (REGP).
The second and final performance period of the one-off,
discontinued REGP ended on 31 December 2014 and the second
tranche of the award vested. The plan was introduced in 2010
during a challenging and volatile business environment and in the
context of a newly appointed Chief Executive Officer (CEO). The
company’s underlying revenues had declined, constant currency
earnings had declined and Reed Elsevier PLC’s and Reed Elsevier
NV’s share prices were flat for 2009 (in contrast to 22% and 36%
increases in the FTSE100 and AEX indices respectively).
Committee) determined at the time that prior multi-year plans for
the Executive Directors no longer were best positioned to meet
long-term shareholder interests. Following consultations with
over 30 major shareholders and shareholder representative bodies,
the Committee determined that a balanced pursuit of sustained
earnings growth, return on invested capital and shareholder
returns was more appropriate. To achieve this objective, a one-off,
five-year plan was implemented, focused on EPS growth, ROIC
and TSR with one-third of the award based on each measure.
The performance targets, put in place in the context of a volatile
business and economic climate in 2010, were stretching.
Since the inception of the REGP, average growth in adjusted
earnings per share for the two performance periods under the
plan were 7% and 8.5%, ROIC increased from 10.4% to 12.8%
and the Reed Elsevier PLC and Reed Elsevier NV share prices
more than doubled, significantly outperforming applicable
local indices and comparators, adding over £11bn in combined
market capitalisation.
The five-year REGP operated in two tranches. The performance
share award with respect to the first tranche vested in H1 2013 at
66.8% and the second tranche vested on 27 February 2015 at 86%,
with TSR targets having been almost fully achieved with respect to
the second tranche and EPS and ROIC around the middle of the
target range. Since the plan was designed to target and reward
performance over a five-year period (2010-2014), performance
and total payout need to be assessed over that entire period.
Since 2013 the CEO was the only remaining participant in the REGP
and no other awards have been or will be granted under the plan.
As intended when it was originally adopted, the CEO again
participates in rolling annual grants of three-year performance
cycle LTIP awards, with awards vesting, subject to performance,
commencing in 2016.
2014 annual incentive payments to the Executive Directors were
just above target and ROIC and EPS performance in respect of the
2012-14 cycle of the BIP (Bonus Investment Plan) and the ESOS
(Executive Share Option Scheme) resulted in respective outcomes
for the CEO close to and at the full amount of the original awards.
Duncan Palmer’s employment with the Group terminated on
24 September 2014 in accordance with the terms previously
disclosed in the 2013 Remuneration Report.
Nick Luff joined the Group during the year and the performance
shares with a 2013-2014 performance period, which were
awarded to him on joining as part compensation for forfeited
entitlements from previous employment, vested in full.
As we are not proposing any changes to the Remuneration Policy
which was approved by shareholders in April 2014, it will continue
to apply unchanged for 2015.
In line with increases for the wider employee population, the
Remuneration Committee has approved 2015 salary increases for
the Executive Directors of 2.5%.
This year’s Report has been prepared in a manner which balances
the specific local requirements of the UK Regulations and the
Dutch Code with the desire to provide additional information which
may be helpful to our broader investor base.
Given the late cycle impact of the global economic crisis on the
business’s professional markets and the then recent acquisition of
the ChoicePoint business, the Remuneration Committee (the
Wolfhart Hauser
Chairman, Remuneration Committee
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76
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Annual Remuneration Report
Single Total Figure of Remuneration – Executive Directors (audited)
(a)
(b)
(c)
(d)
(e)
Short-term employee benefits
Share based awards
(f)
Pension
(g)
(h)
Total
(i)
£’000
Erik
Engstrom
2014
2013
Nick Luff (6) 2014
Duncan
Palmer
2014
2013
Salary
1,104
1,077
217
442
600
Benefits (5)
Annual
Incentive
UK statutory
basis (1,2,4,7)
Dutch Civil
Code basis (3)
UK statutory
basis (2)
Dutch Civil
Code basis (3)
UK statutory
basis (1,2)
Dutch Civil
Code basis (3)
29
28
5
202
230
1,170
1,134
685
0
609
13,181
2,472
1,371
0
0
3,943
3,300
1,341
0
598
692
719
65
84
114
562
528
65
84
114
16,176
5,430
2,343
728
1,553
6,808
6,067
2,313
728
2,151
(1) The 2014 figure includes the vesting of the second and final tranche of the discontinued REGP.
(2) UK statutory basis (columns (d), (f) and (h)): These figures are calculated in accordance with the methodology set out in the BIS
Regulations. They include, for performance-related Share based awards, the value attributable to share price appreciation since the
date the award was granted. In the case of the CEO’s figures, the amount included that relates to share price appreciation is £1.5m for
2013 and £7.6m for 2014.
(3) Dutch Civil Code basis (columns (e), (g) and (i)): These figures comply with the requirements of the Dutch Civil Code. The figures for
Share based awards comprise the multi-year incentive charges in accordance with IFRS2 – Share based Payment. These IFRS2
charges do not reflect the actual value received on vesting. The figures for pensions reflect the cost of pension provision which
comprises (i) for defined benefit schemes, the transfer value of the increase in accrued pension during the year (net of inflation,
Directors’ contributions and participation fee) based on the factors and basis applicable prior to the introduction of the new UK statutory
basis in 2013 and (ii) for defined contribution schemes, payments made to the scheme or to the Executive Director in lieu of pension.
(4) Share based awards for Erik Engstrom (columns (d) and (e)): The figure for 2013 in column (d) was based on an estimate and has
been restated in this Report to reflect the amount vested and the share prices and foreign exchange rates on the vesting dates of the
2011-13 cycle of BIP and ESOS. The vesting percentages under these plans were determined on 28 February 2014 and were in line
with those disclosed on page 87 in the 2013 Remuneration Report. Using the share prices and exchange rates on the vesting dates
increased the 2013 disclosed figure by £5,651 (from £2,466,655 to £2,472,306). The 2014 figures reflect the vesting of the matching
shares under the final tranche of the REGP measured over the 2010-14 period and the 2012-14 cycle of BIP and ESOS, both measured
over the 2012-14 period. As the REGP matching shares and BIP vest after the approval date of the Report and ESOS vests in May 2015,
the average share prices and foreign exchange rates for the last quarter of 2014 have been used to arrive at an estimated figure under
the UK statutory basis in respect of these awards. The amount attributable to the vesting of the final tranche of the REGP in the UK
statutory basis 2014 Share based awards figure is £9m. The Share based awards figure includes the dividend equivalent payments
paid out in cash in 2015 on the REGP matching shares and the BIP. The proportion of the value of the CEO’s Share based awards under
the UK statutory basis that relates to share price appreciation between the dates of grant and vesting is 59% (or £1.5m) for 2013 and
57% (or £7.6m) for 2014 using, as required, the average share prices for the last quarter of 2014.
(5) Benefits: Each Executive Director receives a car allowance, private medical/dental insurance and the company meets the cost of tax
return preparation. In respect of Duncan Palmer, the figure also includes a cash adjustment payment of £162,906 that was
contractually due to him on termination relating to the pro-rated restricted share award released to him and legal expenses of £2,760
met by Reed Elsevier in connection with his loss of office arrangement. Following his termination date, although not reflected in the
2014 figure, he received a cash payment of £75,117, representing dividend equivalents on his pro-rated restricted shares granted in
2012. All payments are in accordance with policy as disclosed on pages 83 and 84 of the 2013 Remuneration Report. The 2013 benefits
figure for Duncan Palmer included estimated amounts in respect of the relocation benefits and has been restated in this Report to
reflect actuals. This reduced the 2013 benefits figure previously reported by £1,768 (from £231,668 to £229,900).
(6) Nick Luff receives an annual base salary of £650,000, benefits as per note 5 and a 30% of salary cash allowance in lieu of pension.
He participates in the annual incentive plan (AIP) and is eligible for annual multi-year incentive grants in accordance with the policy
approved by shareholders at the 2014 Annual General Meetings of Reed Elsevier PLC.
(7) Exchange rates used for Share based awards: The exchange rates used to convert Share based awards to pounds sterling are
(i) for the UK statutory basis, those that applied at the vesting dates or, if vesting has not occurred at the time of sign off of this Report,
the average exchange rates for the last quarter of 2014, (ii) for dividend equivalents, the exchange rates at the time of payment and
(iii) for estimated dividend equivalents in respect of awards for which vesting has not occurred at the time of sign off of this Report and
which are yet to be paid, the average exchange rates for the last quarter of 2014.
(8) Total remuneration for Directors: This is set out in note 28 to the combined financial statements on page 130.
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RELX Group Annual Reports and Financial Statements 2014
77
2014 Annual Incentive
Set out below is a summary of performance against each financial measure and the resulting annual incentive payments for 2014
(payable in March 2015):
Performance
measure
Relative
weighting
Achievement vs target
Revenue
30%
Adjusted profit
after tax
Cash flow
conversion rate
30%
10%
Key Performance
Objectives (KPOs)
30%
Erik Engstrom
(six KPOs)
Key Performance
Objectives (KPOs)
30%
Nick Luff
(six KPOs)
Underlying revenue growth of 3% was at target,
reflecting good growth in electronic and face-to-face
revenues in a mixed macroeconomic environment.
Total adjusted profit after tax grew by 7% in constant
currency, just above target, reflecting a combination of
underlying revenue growth and continued process
innovation.
Cash flow conversion of 96% was just above target,
reflecting strong profits and the cash flow impact from
continued capital expenditure to enable continued
investment in technology and new products and services.
The first and second KPOs, related to business profile
evolution through organic development and selective
acquisitions and disposals, were achieved.
The third KPO, related to the development of the corporate
structure and the global functions, was achieved.
The fourth and fifth KPOs, related to specific strategic
initiatives across business areas and select priorities within
each business, including technology and product
development milestones, were achieved.
The sixth KPO was to complete the actions listed in the 2013
Corporate Responsibility Report and meet the quantified
targets in the report. This KPO was almost fully met as set
out on pages 40 to 47.
The first KPO, related to 2014 final results and reporting,
was achieved.
The second KPO, related to achieving specific operating
plan and financial milestones for the company, was achieved.
The third and fourth KPOs, related to specific deliverables
for the finance function, were essentially fully achieved.
The fifth KPO, related to the development of the corporate
structure, was achieved.
The sixth KPO was to complete the actions listed in the 2013
Corporate Responsibility Report and meet the quantified
targets in the report. This KPO was almost fully met as set
out on pages 40 to 47.
Payout as %
of salary
Erik Engstrom
Payout as %
of salary
Nick Luff
Close to 30%
Close to 30%
Just above 30% Just above 30%
Just above 10% Just above 10%
Close to 30%
Close to 30%
* The maximum annual incentive opportunity is 150% of base salary.
** Nick Luff joined the Group on 1 September 2014. The terms of his service agreement, which he signed on 6 January 2014, provided that his full year 2014 annual incentive
would be reduced on a pound for pound basis by the amount of any annual incentive payment received from his previous employer in respect of services rendered during 2014.
No such payment was received from his previous employer.
The Board believes that disclosing details beyond what is disclosed above would be commercially sensitive and would give competitors
an unfair insight into our strategic direction and annual execution plans.
106.0%*
105.4%*
£1,169,766
£684,938**
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78
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Multi-year incentives
Multi-year incentives with a performance period ended 31 December 2014 were for Erik Engstrom BIP 2012, ESOS 2012 and the final
tranche of the REGP and for Nick Luff a performance share award granted as part compensation for forfeited entitlements from
previous employment.
The Committee assessed the performance measures for these awards and made an overall assessment of underlying business
performance and other relevant factors. The vesting outcome resulting from this review is summarised below.
Discontinued REGP: Final tranche performance outcome
Performance measure
Weighting
TSR measured over five years 2010-2014
1/3rd
Average growth in adjusted EPS in 2013 and 2014(2)
1/3rd
ROIC in 2014(2)
1/3rd
Total vesting percentage:
Performance range
and vesting
levels set at grant (1)
below median
median
upper quartile
0%
30%
100%
below 7% p.a.
7% p.a.
13% p.a. or above
below 10.7%
10.7%
12.7% or above
0%
60%
100%
0%
60%
100%
Achievement against the
performance range
Resulting vesting
percentage
99.7%
In upper quartile of
FTSE and European
comparator
groups; close to
upper quartile in
US comparator
group
8.5% p.a.
70.0%
12.1%
88.2%
86.0%
(1) Calculated on a straight-line basis for performance between the minimum and maximum levels.
(2) The calculation methodology for EPS and ROIC is set out in the 2010 Notices of Annual General Meetings, which can be found on the company’s website.
BIP: 2012-14 cycle performance outcome
Performance measure
Weighting
Average growth in adjusted EPS over the three-year
performance period(2)
50%
ROIC in the third year of the performance period(2)
50%
Total vesting percentage:
Performance range
and vesting
levels set at grant (1)
Achievement against
the performance
range
Resulting vesting
percentage
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
below 11%
11%
11.5%
12% or above
0%
50%
75%
100%
0%
50%
75%
100%
8.4% p.a.
93.7%
13.0%
100%
96.8%
(1) Calculated on a straight-line basis for performance between the minimum and maximum levels.
(2) The calculation methodology for EPS and ROIC is set out in the 2010 Notices of Annual General Meetings, which can be found on the company’s website.
ESOS: 2012-14 cycle performance outcome
Performance measure
Weighting
Performance range
and vesting
levels set at grant
Achievement against
the performance
range
Resulting vesting
percentage
Average growth in adjusted EPS over the three-year
performance period
100%
below 6% p.a.
6% p.a. or above
0%
100%
8.4% p.a.
100%
Nick Luff: PSP award to compensate for forfeited entitlements from previous employment with performance period ended 31 December 2014
Performance measure
Weighting
Performance range
and vesting
levels set at grant
Achievement against
the performance
range
Resulting vesting
percentage
Average growth in adjusted EPS in 2013 and 2014
2/3rds
ROIC in 2014
Total vesting percentage:
1/3rd
below 7% p.a.
7% p.a. or above
below 10.7%
10.7% or above
0%
100%
0%
100%
8.5% p.a.
100%
12.1%
100%
100%
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RELX Group Annual Reports and Financial Statements 2014
79
Single Total Figure of Remuneration – Non-Executive Directors (audited)
Anthony Habgood
Wolfhart Hauser (from 25 April 2013)
Adrian Hennah
Lisa Hook
Marike van Lier Lels(2)
Robert Polet
Linda Sanford
Ben van der Veer(2)
Total fee
Benefits(1)
Total
2014
2013
£550,000
£90,000
£77,500
£110,000
£56,671
£77,500
£77,500
£95,968
£550,000
£65,058
£65,000
£80,462
£55,085
£65,000
£65,000
£93,220
2014
£2,150
£720
£720
£1,230
£1,230
£1,230
£510
2013
£1,900
£500
£1,000
£500
£1,000
£500
2014
2013
£552,150
£90,720
£78,220
£111,230
£56,671
£78,730
£78,730
£96,478
£551,900
£65,058
£65,500
£81,462
£55,085
£65,500
£66,000
£93,720
(1) Benefits comprise the notional benefit of tax filing support provided to Non-Executive Directors for filings outside their home country resulting from their directorships
with the Group. The incremental assessable benefit charge per tax return has been agreed for 2014 to amount to £510 for a UK tax return and £720 for a Netherlands tax
return. Anthony Habgood’s benefits also include £1,430 (£1,400 in 2013) in respect of private medical insurance.
(2) The fees for Marike van Lier Lels and Ben van der Veer were paid in euros and were €70,272 and €119,000 respectively for 2014. For reporting purposes these were
converted into pounds sterling at the average exchange rate for 2014. The 2013 figures were converted into pounds sterling at the average exchange rate for 2013.
(3) The total remuneration for Directors is set out in note 28 to the combined financial statements on page 130.
2014 Non-Executive Directors’ fees
The fees in the Single Total Figure table for Non-Executive Directors reflect the following fees in 2014:
Chairman
Non-Executive Directors*
Senior Independent Director
Chairman of:
– Audit Committee
– Remuneration Committee
Committee membership fee:
– Audit Committee
– Remuneration Committee
– Nominations Committee
Annual fee 2013
£550,000
£65,000/€80,000
£20,000
£25,000/€30,000
£20,000
Annual fee 2014
£550,000
£65,000/€80,000
£25,000
£25,000/€30,000
£25,000
£12,500
£12,500
£7,500/€9,000
* An annual fee of €65,000 is paid to Marike van Lier Lels in respect of her membership of the Reed Elsevier NV Board and reflects her time commitment to that company.
Since 22 July 2014, she chaired the Board of Elsevier Reed Finance BV for which an annual fee of €10,000 is payable.
Total pension entitlements (audited)
Erik Engstrom is a member of the Group’s UK defined benefit
pension arrangements. Further details are provided in the Policy
Report on page 79 of the 2013 Remuneration Report and below.
Pension – UK statutory basis
Accrued annual pension at
31 December 2013
£227,360
Accrued annual pension
at 31 December 2014
£263,704
Single figure
pensions value
£691,702(1)
Pension – Standard information
Pension – Dutch Civil Code basis (consistent with prior disclosure)
Age at December
2014
Normal
retirement age
Director’s
contributions
Participation
fee
51
60
£11,216
£23,962
Increase in accrued pension during
the year (net of inflation)
Transfer value(2) at 31.12.14 of increase in
accrued pension during the year (net of
inflation, Directors’ contributions and
participation fee)
£561,989
£36,344
Since October 2013, the CEO pays a participation fee on the amount
of his base salary which exceeds the UK earnings cap. Starting
with an initial rate of 1%, on 1 April 2014 the fee increased to 3%,
and each 1 April thereafter this fee will increase by a further 2% of
base salary which exceeds the UK earnings cap.
(1) Net of Directors’ contribution and participation fee.
(2) The transfer value represents a liability in respect of Directors’ pension
entitlements, and is not an amount paid or payable to the Director calculated
using the factors and basis applicable prior to the introduction of the UK statutory
basis in 2013.
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80
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Scheme interests awarded during the financial year (audited)
CURRENT MULTI-YEAR INCENTIVE PLANS
Basis on which
award is made
Face value
of award at
grant(1)
Value of awards if
vest in line with
expectations(2)
Percentage of maximum that
would be received if threshold
performance achieved (3)
End of
performance
period
BIP – matching share awards
Erik Engstrom
Nick Luff
Opportunity to
invest cash and/or
shares up to value
of target bonus
opportunity and
receive 1 for 1
matching award
£1,076,856
£721,493
If one measure pays out at threshold,
the overall payout is 25%. If both
measures pay out at threshold,
the overall payout is 50%.
31 December
2016
£649,992
£435,495
LTIP – performance share awards
Erik Engstrom
250% of salary
£2,692,223
£1,346,111
Nick Luff
200% of salary
£1,299,988
£649,994
If the measure with the lowest payout
at threshold pays out at threshold,
the overall payout is 3%. If each
measure pays out at threshold,
the overall payout is 32%.
31 December
2016
ESOS – market value options
Erik Engstrom
250% of salary
£2,692,223
£430,756
33%
Nick Luff
200% of salary
£1,299,988
£207,998
31 December
2016
ONE-OFF MULTI-YEAR INCENTIVE PLAN AWARDS TO COMPENSATE FOR FORFEITED ENTITLEMENTS FROM PREVIOUS EMPLOYMENT
Performance share awards(4)
Nick Luff
200% of salary
£1,299,988
£1,299,988
200% of salary
£1,299,988
£649,994
If the measure with the lowest payout
at threshold pays out at threshold,
the overall payout is 33%. If each
measure pays out at threshold,
the overall payout is 100%.
If the measure with the lowest payout
at threshold pays out at threshold,
the overall payout is 3%. If each
measure pays out at threshold,
the overall payout is 32%.
31 December
2014
31 December
2015
(1) The face value of the LTIP and ESOS awards is calculated using (1) the middle market quotation of PLC ordinary shares; (2) the closing price of NV ordinary shares; and (3)
the exchange rate on the day before grant. In respect of grants made to Erik Engstrom on 7 April 2014, (1) was £9.245 and (2) was €15.82. In respect of Nick Luff, who joined
the Group on 1 September 2014, and whose grants were made on 2 September 2014, (1) was £9.90 and (2) was €17.50. These share prices are used to determine the number
of awards granted, as well as to set option exercise prices. The face value of the ESOS options shown in this column has not been reduced to reflect the fact that the
aggregate option price is payable on exercise. The face value of the BIP awards is calculated using the average price of participants’ investment shares purchased by the
trustee. In respect of the matching award to Erik Engstrom on 7 April 2014, who invested in NV ADRs, the price per NV ADR was $42.951. In respect of the matching award to
Nick Luff on 2 September 2014, who invested in PLC and NV ordinary shares, the price per PLC ordinary share was £9.96 and the price per NV ordinary share was €17.614.
The face values for BIP and LTIP do not take into account the dividend equivalents relating to those awards.
(2) For BIP, LTIP and ESOS, vesting in line with expectations is as per the performance scenario chart disclosed on page 83 of the 2013 Remuneration Report, i.e. 67% for BIP,
50% for LTIP and 80% for ESOS. For options vesting in line with expectations, a valuation factor of 20% of the face value of the award at grant has been applied. Vesting in line
with expectations for the performance share awards granted to Nick Luff, assumes, in respect of the award with a performance period ended 31 December 2014, that the
thresholds for EPS and ROIC are met which results in 100% vesting. In respect of the award with the performance period ending 31 December 2015, which mirrors the
performance conditions applicable to the 2013 LTIP award, vesting in line with expectations is 50%.
(3) Threshold payout levels for each measure have been included. Where there are multiple measures, it is possible to achieve threshold, and hence payout, in respect of just
one of the measures (or, for TSR, in respect of one of the three TSR comparator groups). The performance measures and targets for awards granted in 2014 under each of
the plans and for the performance share awards granted to Nick Luff are set out on page 81.
(4) The performance share awards granted to Nick Luff on 2 September 2014 were essential to facilitate his recruitment and were disclosed in the notices of the 2014 annual
general meetings of Reed Elsevier PLC and Reed Elsevier NV. The awards were split evenly between ordinary shares in Reed Elsevier PLC and Reed Elsevier NV. The
awards of Reed Elsevier PLC ordinary shares fall within paragraph 9.4.2(2)R of the UK Listing Rules and the awards of Reed Elsevier NV ordinary shares were approved by
shareholders at the Annual General Shareholders' Meeting of Reed Elsevier NV on 23 April 2014. The awards are not pensionable and lapse on resignation or dismissal for
cause (although in the case of a resignation, if an award has already vested and the date of resignation is within two years of Mr Luff joining the Group, then time pro-ration
clawback provisions will apply to such award). In all other circumstances of termination, the share awards will vest subject to performance at the end of the applicable
performance period with pro-ration for service applied, except in the case of a company initiated termination in which event the award will not be pro-rated.
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RELX Group Annual Reports and Financial Statements 2014
81
The following targets and vesting scales apply to awards granted
in 2014:
BIP: 2014–16 cycle
Match earned on personal
investment
Average growth in adjusted EPS
over the three-year
performance period*
0%
50%
75%
100%
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
ROIC in the third
year of the
performance
period*
below 11.6%
11.6%
12.1%
12.6% or above
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the three-year
performance period
0%
33%
52.5%
65%
75%
85%
92.5%
100%
below 5% p.a.
5% p.a.
6% p.a.
7% p.a.
8% p.a.
9% p.a.
10% p.a.
11% p.a. or above
ROIC in the third
year of the
performance
period
below 11.6%
11.6%
11.85%
12.1%
12.35%
12.6%
12.85%
13.1% or above
* EPS and ROIC have equal weighting and straight-line vesting applies to
performance between the points.
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth/ROIC percentages.
LTIP: 2014-16 cycle
Vesting is dependent on three separate performance measures of
equal weighting: a TSR measure comprising three comparator
groups, an EPS measure and a ROIC measure.(1)
Vesting percentage of each third of
the TSR tranche(2)
TSR ranking within the relevant TSR
comparator group
0%
30%
100%
Below median
Median
Upper quartile
(1) The calculation methodology for TSR, EPS and ROIC is set out in the 2013 Notices
of Annual General Meetings, which can be found on the company’s website.
(2) Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
The three TSR comparator groups (Sterling, Euro and US Dollar)
reflect the fact that the Group accesses equity capital markets
through three exchanges – London, Amsterdam and New York –
in three currency zones. The Group’s TSR performance is
measured separately against each comparator group and each
ranking achieved will produce a payout, if any, in respect of
one-third of the TSR measure. The proportion of the TSR measure
that vests will be the sum of the three payouts.
Each comparator group comprises approximately 40 companies.
The companies for the 2014-16 LTIP cycle were selected on the
following basis (unchanged from 2013-15):
(a) they were in a relevant market index or are the largest listed
companies on the relevant exchanges at the end of the year
before the start of the performance period: the FTSE 100 for
the Sterling group; AEX, Euronext and the Frankfurt Stock
Exchange for the Euro group; and the S&P 500 for the
US Dollar group;
(b) certain companies were then excluded:
those with mainly domestic revenues (as they do not reflect
the global nature of the Group’s customer base)
those engaged in extractive industries (as they are exposed
to commodity cycles); and
financial services companies (as they have a different risk/
reward profile).
(c) the remaining companies were then ranked by market
capitalisation and, for each comparator group, the 20
companies above and below the Group were taken; and
(d) relevant listed global peers operating in businesses similar to
those of the Group but not otherwise included were added.
ESOS: 2014-2016 cycle
Proportion of the award vesting
Average growth in adjusted EPS over the
three-year performance period*
0%
33%
80%
100%
below 4% p.a.
4% p.a.
6% p.a.
8% p.a. or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth percentages.
PSP awards granted to Nick Luff as compensation for forfeited
entitlements from previous employment
PSP: Performance period ended 31 December 2014
Vesting percentage
Average growth in adjusted EPS
in 2013 and 2014*
0%
100%
below 7% p.a.
7% p.a. or above
ROIC in 2014*
below 10.7%
10.7% or above
* 2/3rds of the award is subject to EPS and 1/3rd subject to ROIC performance.
PSP: Performance period ending 31 December 2015
Vesting is dependent on three separate performance measures
of equal weighting: a TSR measure (comprising three comparator
groups as set out in the 2013 Notices of Annual General Meetings),
an EPS measure and a ROIC measure.(1)
Vesting percentage of each third of
the TSR tranche(2)
TSR ranking within the relevant TSR
comparator group
0%
30%
100%
Below median
Median
Upper quartile
(1) The calculation methodology for TSR, EPS and ROIC is the same as applies to the
LTIP award granted to Erik Engstrom in 2013.
(2) Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the three-year
performance period
0%
33%
52.5%
65%
75%
85%
92.5%
100%
below 5% p.a.
5% p.a.
6% p.a.
7% p.a.
8% p.a.
9% p.a.
10% p.a.
11% p.a. or above
ROIC in the third
year of the
performance
period
below 11.2%
11.2%
11.45%
11.7%
11.95%
12.2%
12.45%
12.7% or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth/ROIC percentages.
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GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
External appointments
The Committee believes that the experience gained by allowing
Executive Directors to serve as Non-Executive Directors on the boards
of other organisations is of benefit to the Group. Accordingly,
Executive Directors may, subject to the approval of the Chairman
and the CEO (or the Chairman only in the case of the CEO), serve as
Non-Executive Directors on the boards of up to two non-associated
companies (of which only one may be a major company) and they
may retain remuneration arising from such appointments.
Nick Luff is a Non-Executive Director of Lloyds Banking Group plc
and received fees of £45,000 since his appointment as a Director
of the Group up to the end of 2014. Duncan Palmer is a
Non-Executive Director of Oshkosh Corporation and received fees
of £44,773 and 2,500 shares of Oshkosh common stock during the
year up to the date of termination of his employment with the
Group (£63,141 in 2013).
Payments to past Directors and payments for loss of office
(audited)
There have been no payments to past Directors or payments for
loss of office in 2014 other than those included in the single
figure table and the notes thereto.
Statement of Directors’ shareholdings and other share
interests (audited)
Shareholding requirement
The Committee believes that a closer alignment of interests can
be created between senior management and shareholders if
executives build and maintain a significant personal stake in the
Group. The shareholding requirements applicable to the Executive
Directors are set out in the table below. Shares that count for this
purpose are any type of Reed Elsevier PLC or Reed Elsevier NV
security owned outright by the individual and their spouse, civil
partner or dependent child.
Meeting the shareholding requirement is both a vesting condition
for awards granted and a requirement to maintain eligibility for
future awards. Shareholding requirements fall away on leaving
the company.
On 31 December 2014, the Executive Directors’ shareholdings
were as follows (valued using the middle market closing prices of
the relevant securities):
Shareholding
requirement (% of
31 December 2014
annual base salary)
Actual shareholding as
at 31 December 2014
(% of 31 December 2014
annual base salary)
Erik Engstrom
Nick Luff
300%
200%*
830%
59%
* Nick Luff has until 31 December 2016 to build up to his required level of shareholding and
is required to retain all net shares earned from incentive plans until he reaches this level.
Share interests
Reed Elsevier PLC
ordinary shares
Reed Elsevier NV
ordinary shares
1 January
2014
31 December
2014
1 January
2014
31 December
2014
114,552
50,000
5,163
118,552
50,000
4,107
10,508
88
*
1,000
3,600
88**
17,187
1,000
6,700
513,765
25,000
750
516,765
25,000
2,010
4,800
4,800
30,022
*
30,022**
12,106
5,000
7,000
Erik Engstrom
Anthony Habgood
Wolfhart Hauser
Adrian Hennah
Lisa Hook
Marike van Lier Lels
Duncan Palmer
Nick Luff
Robert Polet
Linda Sanford
Ben van der Veer
* On date of appointment.
** On the date on which ceased to be an Executive Director.
There have been no changes in these share interests at the date of this Report for those
who were Directors of Reed Elsevier PLC and Reed Elsevier NV on 31 December 2014.
Multi-year incentive interests (audited)
All outstanding unvested options and share awards in the tables
overleaf and on page 84 are subject to performance conditions.
For disclosure purposes, any PLC and NV ADRs awarded under
the BIP or the REGP have been converted into ordinary share
equivalents. Between 31 December 2014 and the date of this
Report, there have been no changes in the options or share awards
held by Executive Directors.
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RELX Group Annual Reports and Financial Statements 2014
83
Erik Engstrom
OPTIONS
Year of
grant
Type of
security
No. of
options
held on
1 Jan
2014
No. of
options
granted
during
2014
ESOS
2006
PLC ord
178,895
NV ord
120,198
2011
PLC ord
139,146
NV ord
92,953
2012*
PLC ord
198,836
NV ord
139,742
2013
PLC ord
178,799
NV ord
124,337
2014
PLC ord
NV ord
Total PLC ords
Total NV ords
695,676
477,230
145,604
102,839
145,604
102,839
* The performance outcome for the ESOS 2012 is set out on page 78.
Option
price
£5.305
€11.470
£5.390
€8.969
£5.155
€9.030
£7.345
€12.530
£9.245
€15.820
No. of
options
exercised
during
2014
178,895
120,198
Market
price per
share at
exercise
£9.138
€15.755
178,895
120,198
No. of
options
held on
31 Dec
2014
139,146
92,953
198,836
139,742
178,799
124,337
145,604
102,839
662,385
459,871
Unvested
options
vesting on
Options
exercisable
until
05 May 21
05 May 21
02 May 22
02 May 22
09 May 23
09 May 23
07 Apr 24
07 Apr 24
02 May 15
02 May 15
09 May 16
09 May 16
07 Apr 17
07 Apr 17
SHARES
BIP
No. of
unvested
shares
held on
1 Jan 2014
122,352
136,950
96,830
Year of
grant
Type of
security
2011
2012(1)
2013
2014
NV ord
NV ord
NV ord
NV ord
€9.030
€12.530
81,388
€15.820
No. of
shares
awarded
during
2014
Market
price
per share
at award
No. of shares
vested/
performance
tested during
2014
Market
price per share
at vesting/
performance
testing
No. of
unvested/non-
performance
tested shares
held on
31 Dec 2014
€8.969
110,728
€15.975
End of
performance
period
Date of release
LTIP
2013 PLC ord
178,799
NV ord
124,337
REGP(2)
2014 PLC ord
NV ord
2013 PLC ord
NV ord
Total PLC ords
Total NV ords
145,604
102,839
145,604
184,227
321,895
450,494
500,694
930,963
£7.345
€12.530
£9.245
€15.820
£7.760
€13.150
110,728
136,950
Dec 2014
96,830
Dec 2015
81,388
Dec 2016
178,799
Dec 2015
124,337
Dec 2015
145,604
Dec 2016
Dec 2016
Dec 2014
Dec 2014
102,839
321,895
450,494
646,298
992,838
H1 2015
H1 2016
H1 2017
H1 2016
H1 2016
H1 2017
H1 2017
H1 2015
H1 2015
(1) The performance outcome for the BIP 2012 is set out on page 78.
(2) The performance outcome for the second and final tranche of the REGP is set out on page 78. The deferred shares from the first tranche of the REGP (i.e. 214,855 PLC
ordinary shares and 141,094 NV ordinary shares) were performance tested in H1 2013 and fully disclosed as part of the 2012 single figure on page 91 of the 2013
Remuneration Report.
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84
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Nick Luff
OPTIONS
ESOS
Year of
grant
2014
Type of
security
PLC ord
NV ord
Total PLC ords
Total NV ords
SHARES
BIP
LTIP
PSP
Year of
grant
Type of
security
2014
PLC ord
NV ord
2014
PLC ord
NV ord
2014
PLC ord
2014
NV ord
PLC ord
NV ord
Total PLC ords
Total NV ords
Duncan Palmer
SHARES
No. of
options
exercised
during
2014
Market
price per
share at
exercise
No. of
options
held on
1 Jan
2014
No. of
options
granted
during
2014
65,656
46,963
65,656
46,963
Option
price
£9.900
€17.500
No. of
options
held on
31 Dec
2014
65,656
46,963
65,656
46,963
Unvested
options
vesting on
Options
exercisable
until
02 Sep 17 02 Sep 24
02 Sep 17 02 Sep 24
No. of
unvested
shares
held on
1 Jan 2014
No. of
shares
awarded
during 2014
Market price
per share at
award
No. of shares
vested/
performance
tested during
2014
Market price
per share at
vesting/
performance
testing
No. of
unvested/non-
performance
tested shares
held on
31 Dec 2014
£9.900
€17.500
£9.900
€17.500
£9.900
€17.500
£9.900
€17.500
32,630
22,870
65,656
46,963
65,656
46,963
65,656
46,963
229,598
163,759
32,630
22,870
65,656
46,963
65,656
46,963
65,656
46,963
229,598
163,759
End of
performance
period
Date of
release
Dec 2016
H1 2017
Dec 2016
H1 2017
Dec 2016
H1 2017
Dec 2016
H1 2017
Dec 2014
Dec 2014
Dec 2015
Dec 2015
H1 2015
H1 2015
H1 2016
H1 2016
RSP*
Year of
grant
2012
Type of
security
PLC ord
NV ord
Total PLC ords
Total NV ords
No. of
unvested
shares
held on
1 Jan 2014
72,042
51,378
72,042
51,378
No. of
shares
awarded
during 2014
Market price
per share at
award
£6.015
No. of shares
vested/
performance
tested during
2014
Market price
per share at
vesting/
performance
testing
No. of
unvested/non-
performance
tested shares
held on
31 Dec 2014
End of
performance
period
£9.781
€17.570
72,042
51,378
72,042
51,378
Date of
release
25 Sep 14
25 Sep 14
* Reflects the pro-rated number of shares following his resignation as previously disclosed. In accordance with the terms of the award, the full award was granted over Reed
Elsevier PLC ordinary shares but half was settled with Reed Elsevier NV ordinary shares.
94118_Reed_AR_p061-088.indd 84
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RELX Group Annual Reports and Financial Statements 2014
85
Performance graphs
The graphs below show total shareholder returns for Reed Elsevier PLC and Reed Elsevier NV, calculated on the basis of the average share
price in the 30 trading days before the respective year end and assuming dividends were reinvested. Reed Elsevier PLC’s performance is
compared with the FTSE 100 and Reed Elsevier NV with the AEX Index (to reflect their respective memberships of those indices), over the
five years from 31 December 2009 to 31 December 2014. This period also reflects the tenure of the CEO and the TSR performance period
for the final tranche of the REGP. The three-year charts cover the performance period of the 2012-14 cycles of BIP and ESOS.
3 years
REED ELSEVIER PLC vs FTSE 100 – 3 YEARS TSR
REED ELSEVIER NV vs AEX – 3 YEARS TSR
%
300
275
250
225
200
175
150
125
100
75
+135%
∆=99%
+36%
%
300
275
250
225
200
175
150
125
100
75
+154%
∆=98%
+56%
Dec-11
Dec-12
Reed Elsevier PLC
Dec-13
FTSE 100
Dec-14
Dec-11
Dec-12
Dec-13
Dec-14
Reed Elsevier NV
AEX Index
5 years
REED ELSEVIER PLC vs FTSE 100 – 5 YEARS TSR
REED ELSEVIER NV vs AEX – 5 YEARS TSR
%
300
275
250
225
200
175
150
125
100
75
+169%
∆=121%
+48%
%
300
275
250
225
200
175
150
125
100
75
+192%
∆=138%
+54%
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Reed Elsevier PLC
FTSE 100
Reed Elsevier NV
AEX Index
10 years
REED ELSEVIER PLC vs FTSE 100 – 10 YEARS TSR
%
300
275
250
225
200
175
150
125
100
75
4
0
-
c
e
D
5
0
-
c
e
D
6
0
-
c
e
D
7
0
-
c
e
D
8
0
-
c
e
D
9
0
-
c
e
D
0
1
-
c
e
D
1
1
-
c
e
D
2
1
-
c
e
D
3
1
-
c
e
D
4
1
-
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D
+214%
∆=114%
+100%
REED ELSEVIER NV vs AEX – 10 YEARS TSR
%
300
275
250
225
200
175
150
125
100
75
+183%
∆=108%
+75%
4
0
-
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D
5
0
-
c
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D
6
0
-
c
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D
7
0
-
c
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D
8
0
-
c
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D
9
0
-
c
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D
0
1
-
c
e
D
1
1
-
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D
2
1
-
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3
1
-
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4
1
-
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Reed Elsevier PLC
FTSE 100
Reed Elsevier PLC
AEX Index
UK regulations require disclosure of the relative share performance for the six-year period, 2009–2014, of Reed Elsevier PLC. During that
period the total return for the FTSE 100 was +94% while TSR for Reed Elsevier PLC was +170%, an outperformance of 76 percentage points.
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86
CEO historical pay table
The table below shows the historical CEO pay over a seven-year period. 2008 has been included to show the pre-2009 position, as 2009
was a transition year with three CEO incumbents.
£’000
CEO
Annualised base
salary
Annual incentive
payout as a % of
maximum
Multi-year
incentive vesting as
a % of maximum
CEO total (UK
statutory basis)(1)
CEO total (Dutch
Civil Code basis)(2)
2008
2009 (3)
2010
2011
2012
2013
2014
Sir Crispin
Davis
Sir Crispin
Davis
Ian
Smith
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
1,181
1,181
900
1,000
1,000
1,025
1,051
1,077
1,104
61%
30%
37%
71%
67%
66%
73%
70%
71%
100%
0%
0%
0%
0%
0%
70%(4)
96%(4)
90%(4)
7,193
706
1,033
6,631
(514)
1,033
426
431
3,140
2,738
11,145(5)
5,425
16,176(6)
2,675
5,045
5,443
6,067
6,808
(1) UK statutory basis: This is described in footnote 2 to the Single Total Figure table on page 76.
(2) Dutch Civil Code basis: This is described in footnote 3 to the Single Total Figure table on page 76.
(3) Sir Crispin Davis was CEO from 1 January to 31 March, Ian Smith was CEO from 1 April to 10 November and Erik Engstrom was CEO
from 11 November to 31 December.
(4) The 2014 percentage reflects REGP tranche 2, BIP and ESOS. The 2013 percentage reflects BIP and ESOS only and the 2012 figure
reflects REGP tranche 1 and BIP.
(5) The 2012 figure reflects the vesting of tranche 1 of the REGP and includes the entire amount that was performance tested over the
2010-12 period, including the 50% of shares deferred until 2015 in accordance with the plan rules. It also includes £3m attributed to
share price appreciation.
(6) The 2014 figure includes the vesting of the second and final tranche of the discontinued REGP and includes £7.6m attributed to share
price appreciation.
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RELX Group Annual Reports and Financial Statements 2014
87
Comparison of change in CEO pay with change in employee pay
The table below shows the percentage change in remuneration
(salary, benefits and annual incentive) from 2013 to 2014 for the
CEO compared with the average employee.
LTIP: 2015–17 cycle
Vesting is dependent on three separate performance measures of
equal weighting: a TSR measure (comprising three comparator
groups), an EPS measure and a ROIC measure.(1)
Vesting percentage of each third
of the TSR tranche(2)
TSR ranking within the relevant
TSR comparator group
0%
30%
100%
Below median
Median
Upper quartile
(1) The calculation methodology for TSR, EPS and ROIC is set out in the 2013 Notices
of Annual General Meetings, which can be found on the company’s website. The
methodology for selecting the TSR comparator group companies is unchanged
from 2013 (see page 89 of the 2013 Remuneration Report). Each comparator
group comprises approximately 40 companies. The companies for the 2015-17
LTIP cycle were selected on the same basis as the comparator groups for prior
cycles under this plan.
(2) Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the three-year
performance period
ROIC in the third
year of the
performance period
0%
33%
52.5%
65%
75%
85%
92.5%
100%
below 5% p.a.
5% p.a.
6% p.a.
7% p.a.
8% p.a.
9% p.a.
10% p.a.
11% p.a. or above
below 12.3%
12.3%
12.55%
12.8%
13.05%
13.3%
13.55%
13.8% or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth/ROIC percentages.
ESOS: 2015-2017 cycle
Proportion of the award vesting
Average growth in adjusted EPS over the
three-year performance period*
0%
33%
80%
100%
below 4% p.a.
4% p.a.
6% p.a.
8% p.a. or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth percentages.
Salary
Benefits
Annual incentive
% change from 2013 to 2014
CEO
2.5%
2.0%
3.1%
Average employee*
2.5%
2.5%
3.3%
* This reflects a substantial proportion of our global employee population.
Relative importance of spend on pay
The following table sets out the total employee costs for all
employees, as well as the amounts paid in dividends and
share repurchases.
2014 (£m)
2013 (£m)
% change
Employee costs*
1,709
1,775
Dividends
Share repurchases
565
600
549
600
–4%
+3%
0%
* Employee costs include wages and salaries, social security costs, pensions and
Share based and related remuneration.
Implementation of Remuneration Policy in 2015
Salary: The Committee has awarded a salary increase of 2.5% to
the Executive Directors, which means that, from 1 January 2015,
Erik Engstrom’s salary rose to £1,131,408 and Nick Luff’s salary to
£666,250. This is in line with the guidelines agreed for employees
in the Group’s most significant locations globally for 2015.
AIP: The operation of the AIP in 2015 remains the same as in 2014.
Details of annual financial targets and KPOs are not disclosed as
the Board believes that these are commercially sensitive and that
disclosing them would give competitors an unfair insight into our
strategic direction and annual execution plans. The targets are
designed to be challenging relative to the 2015 execution plan.
Multi-year incentives: The award levels (% of salary) for 2015 are:
BIP opportunity
LTIP
ESOS
CEO
100%
250%
250%
CFO
100%
200%
200%
The targets and vesting scales for the multi-year incentive awards
granted in 2015 are as follows:
BIP: 2015-17 cycle
Match earned on personal
investment
Average growth in adjusted
EPS over the three-year
performance period*
0%
50%
75%
100%
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
ROIC in the third
year of the
performance
period*
below 12.3%
12.3%
12.8%
13.3% or above
* EPS and ROIC have equal weighting and straight-line vesting applies to
performance between the points.
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88
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Remuneration Committee advice
The Committee consists of independent Non-Executive Directors
and the Chairman of RELX Group plc. Details of members and
their attendance are contained in the Corporate Governance
section on page 71. The Chief Legal Officer and Company Secretary
attends meetings as secretary to the Committee. At the invitation
of the Chairman of the Committee, the CEO of RELX Group plc
attends appropriate parts of the meetings. The CEO of RELX
Group plc is not in attendance during discussions about his
remuneration.
The Human Resources Director advised the Committee during
the year.
Towers Watson is the external adviser, appointed by the
Committee through a competitive process. Towers Watson also
provided actuarial and other human resources consultancy
services to some Group companies during the year. The
Committee is satisfied that the firm’s advice continues to be
objective and independent, and that no conflict of interest exists.
The individual consultants who work with the Committee do not
provide advice to the Executive Directors, or act on their behalf.
Towers Watson is a member of the Remuneration Consultants’
Group and conducts its work in line with the UK Code of Conduct
for executive remuneration consulting. During 2014, Towers
Watson received fees of £10,726 for advice given to the Committee,
charged on a time and expense basis.
Shareholder Vote at 2014 Annual General Meetings
At the Annual General Meeting of Reed Elsevier NV, on 23 April 2014, votes cast by proxy and at the meeting in respect of the Directors’
remuneration were as follows:
Resolution
Votes For
% For
Votes Against
% Against
Total votes cast
Votes Withheld
Award of shares to Nick Luff (approval)
481,844,636
99.62%
1,860,791
0.38% 483,705,427
1,797,764
At the Annual General Meeting of Reed Elsevier PLC, on 24 April 2014, votes cast by proxy and at the meeting in respect of the Directors’
remuneration were as follows:
Resolution
Votes For
% For
Votes Against
% Against
Total votes cast
Votes Withheld
Remuneration Policy (approval)
834,792,974
93.83%
54,920,711
6.17% 889,713,685
25,296,745
Remuneration Report (advisory)
810,363,386
89.06%
99,538,952
10.94% 909,902,338
5,107,375
Wolfhart Hauser
Chairman, Remuneration Committee
25 February 2015
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RELX Group Annual Reports and Financial Statements 2014
89
Report of the Audit Committees
This report has been prepared by the Audit Committees of Reed
Elsevier PLC and Reed Elsevier NV in conjunction with the Audit
Committee of RELX Group plc (the Committees) and has been
approved by the respective Boards. It provides an overview of the
membership, responsibilities and activities of the Committees.
The functions of an audit committee in respect of the financing
activities were carried out during 2014 by the Supervisory Board
of Elsevier Reed Finance BV. The Reed Elsevier PLC and Reed
Elsevier NV Audit Committees fulfil their roles from the
perspective of the parent companies and both Committees have
access to the reports to and the work of the RELX Group plc Audit
Committee and the Elsevier Reed Finance BV Supervisory Board
in this respect.
Membership
The Committees comprise at least three independent
Non-Executive Directors. The members of each of the
Committees that served during the year are: Ben van der Veer
(Chairman of the Committees), Adrian Hennah and Linda Sanford.
Adrian Hennah, a UK chartered accountant, and Ben van der Veer,
a registered accountant in the Netherlands, are considered to
have significant, recent and relevant financial experience.
Responsibilities
The main role and responsibilities of the Committees are to assist
the respective boards in fulfilling their oversight responsibilities
regarding:
§§ the integrity of the Group’s interim and full year financial
Financial reporting
In discharging their responsibilities in respect of the 2014 interim
and full year financial statements, the Committees have:
§§ reviewed and discussed areas of significant judgement in the
preparation of the financial statements, including in particular:
i. the carrying values of goodwill and intangible assets – the
significant judgements in respect of asset carrying values
relate to the assumptions underlying the value in use
calculations including discount rates and long-term growth
assumptions. The Committees received and discussed
reports from the RELX Group plc group Financial Controller
on the methodology and the basis of the assumptions used;
ii. capitalisation of internally generated intangible assets
– the capitalisation of costs related to the development of
new products and business infrastructure, together with
the useful economic lives applied to the resulting assets,
requires the exercise of judgement. The Committees
received reports from the RELX Group plc group financial
controller on the amounts capitalised and asset lives
selected for major projects;
iii. uncertain tax positions – assessing potential liabilities
across numerous jurisdictions is complex and requires
judgement in making tax determinations. The Committees
received and discussed reports from the RELX Group plc
head of group taxation on the potential liabilities identified
and judgements applied;
statements and financial reporting processes;
iv. we operate a number of defined benefit schemes which
§§ risk management and internal controls, and the effectiveness
of the internal auditors; and
§§ the performance of the external auditors and the effectiveness
of the external audit process, including monitoring the
independence and objectivity of Deloitte.
The Committees report to the respective Boards on their
activities, identifying any matters in respect of which they consider
that action or improvement is needed and making
recommendations as to the steps to be taken.
The terms of reference of each Audit Committee are reviewed
annually and a copy of each is published on the Group’s website,
www.relxgroup.com.
Committee meetings
The Committees met five times during 2014. The Audit Committee
meetings are typically attended by the Chief Executive Officer, the
Chief Financial Officer, the RELX Group plc group financial
controller, the RELX Group plc chief legal officer, the RELX
Group plc head of audit and risk, and audit partners from the
external auditors.
require management to exercise judgement in estimating
the ultimate cost of providing post-employment benefits,
especially given the length of each scheme’s liabilities. The
recognition of certain scheme liabilities is also subject to
judgement. The Committees received and discussed
reports from the RELX Group plc group Financial Controller
on the methodology and the basis of the assumptions used.
The Committees also received detailed written and verbal reports
from the external auditors on these matters. The Committees
were satisfied with the explanations provided and conclusions
reached.
§§ reviewed the critical accounting policies and compliance with
applicable accounting standards and other disclosure
requirements and received regular update reports on
accounting and regulatory developments; and
§§ considered whether the Annual Report taken as a whole was
fair, balanced and understandable.
Risk management and internal controls
With respect to their oversight of risk management and internal
controls, the Committees have:
§§ received and discussed regular reports summarising the
status of the Group’s risk management activities and the
findings from internal audit reviews and the actions agreed
with management. Areas of focus in 2014 included:
management of investment programmes; post acquisition
integration; regulatory compliance and review of information
security including the management of data privacy; business
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90
GOVERNANCE
REPORT OF THE AUDIT COMMITTEES
continuity planning; and continued compliance with the
requirements of Section 404 of the US Sarbanes-Oxley Act
relating to the documentation and testing of internal controls
over financial reporting;
§§ reviewed and approved the internal audit plan for 2014 and
monitored execution, including progress in respect of
recommendations made;
§§ reviewed the resources, terms of reference and effectiveness
of the RELX Group plc risk management and internal audit
functions;
§§ received presentations from: the RELX Group plc Chief
Compliance Officer on the compliance programmes, including
the operation of the Group’s codes of conduct, training
programmes and whistleblowing arrangements; the RELX
Group plc Chief Strategy Officer and Chief Legal Officer on
information security and other technology-related risks; and the
RELX Group plc Chief Legal Officer on legal issues and claims;
§§ received updates from the RELX Group plc group treasurer on
pension arrangements and funding, treasury policies and risk
management and compliance with treasury policies;
§§ received presentations from the RELX Group plc head of group
taxation on tax policies and related matters;
§§ received regular updates from the Chief Financial Officer on
developments within the finance function. The Committees
monitored the Chief Financial Officer transition to ensure an
effective transfer of responsibilities; and
§§ received presentations from recently appointed chief financial
officers of major businesses.
External audit effectiveness
The Group has a well-established policy on audit effectiveness
and independence of auditors that sets out inter alia: the
responsibilities of each Audit Committee in the selection of
auditors to be proposed for appointment or re-appointment and
for agreement on the terms of their engagement, scope and
remuneration; the auditor independence requirements and the
policy on the provision of non-audit services; the rotation of audit
partners and staff; and the conduct of meetings between the
auditors and the Audit Committees. The policy is available on the
website, www.relxgroup.com.
The auditors are precluded from engaging in non-audit
services that would compromise their independence or violate
any professional requirements or regulations affecting their
appointment as auditors. The auditors may, however, provide
non-audit services which do not conflict with their independence,
and where their skills and experience make them a logical
supplier, subject to pre-approval by the Audit Committees.
Non-audit services performed in the Netherlands are limited
to audit assurance activities. The Committees will continue to
review the policy on the provision of non-audit services in the
light of ongoing regulatory developments.
The Committees have, each quarter, reviewed and agreed the non-
audit services provided in 2014, together with the associated fees
which are set out in note 3 to the combined financial statements.
The non-audit services provided were in the areas of audit-related
activities such as royalty assurance, tax advice and compliance,
due diligence and other transaction-related services.
The external auditors have confirmed their independence and
compliance with the Group policy on auditor independence to the
Audit Committees.
Deloitte LLP and Deloitte Accountants BV or their predecessor
firms were first appointed auditors of Reed Elsevier PLC and Reed
Elsevier NV respectively for the financial year ended 31 December
1994. The auditors are required to rotate the lead audit partners
responsible for the audit engagements every five years. The lead
engagement partners for Reed Elsevier PLC and Reed Elsevier NV
have both completed one year.
The Committees have conducted their review of the performance
of the external auditors and the effectiveness of the external
audit process for the year ended 31 December 2014. The review
was based on a survey of key stakeholders across the Group,
consideration of public reports by regulatory authorities on key
Deloitte member firms and the quality of the auditors’ reporting to
and interaction with the Audit Committees. Based on this review,
the Audit Committees were satisfied with the performance of the
auditors and the effectiveness of the audit process.
Any decision to open the audit to tender is taken only on the
recommendation of the Audit Committees. The Committees
continue to monitor regulatory developments in the UK and the
Netherlands regarding length of audit tenure, tendering and audit
firm rotation. In light of the transition of the Chief Financial Officer
and the continued objectivity, independence and effectiveness of
Deloitte LLP and Deloitte Accountants BV, the Audit Committees
concluded that it was neither appropriate or necessary to change
auditors in respect of the 2015 year end.
The Committees have, therefore, recommended to the respective
boards that resolutions for the re-appointment of Deloitte as
the external auditors be proposed at the forthcoming Annual
General Meetings.
We have commenced preparations for an audit tender process
for rotation of the audit firm in respect of the 2016 financial
year. The audit tender is expected to be concluded in mid-2015
and the selected audit firm will be proposed to the Annual
General Meetings in 2016. In accordance with legislation in the
Netherlands, Deloitte will not be eligible to participate in this
tender.
The effectiveness of the Audit Committees was reviewed as part
of the 2014 Board evaluation.
Ben van der Veer
Chairman of the Audit Committees
25 February 2015
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RELX Group Annual Reports and Financial Statements 2014
91
Financial
statements
and other
information
In this section
92 Combined financial statements
96 Accounting policies
102 Notes to the combined
financial statements
131 Independent auditors’ report
136 Summary combined financial
information in euros
147 Reed Elsevier PLC Annual Report and
Financial Statements
165 Reed Elsevier NV Annual Report and
Financial Statements
187 Other financial information
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92
92
FINANCIAL STATEMENTS AND OTHER INFORMATION
FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
COMBINED FINANCIAL STATEMENTS
Combined income statement
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration and other expenses
Operating profit before joint ventures
Share of results of joint ventures
Operating profit
Finance income
Finance costs
Net finance costs
Disposals and other non operating items
Profit before tax
Current tax
Deferred tax
Tax expense
Net profit for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Net profit for the year
Note
1
1, 2
7
7
8
9
2014
£m
5,773
(2,006)
3,767
(934)
(1,467)
1,366
36
1,402
7
(169)
(162)
(11)
1,229
(357)
88
(269)
960
2013
£m
6,035
(2,118)
3,917
(1,005)
(1,565)
1,347
29
1,376
10
(206)
(196)
16
1,196
(352)
271
(81)
1,115
955
5
960
1,110
5
1,115
Combined statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Net profit for the year
Items that will not be reclassified to profit or loss:
Actuarial (losses)/gains on defined benefit pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified to profit or loss
Other comprehensive loss for the year
Total comprehensive income for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Total comprehensive income for the year
Note
5
9
18
18
9
2014
£m
960
(266)
63
(203)
137
(81)
19
13
88
(115)
845
840
5
845
2013
£m
1,115
40
(24)
16
(88)
65
(3)
(14)
(40)
(24)
1,091
1,086
5
1,091
94118_Reed_AR_p091-134.indd 92
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RELX Group Annual Reports and Financial Statements 2014
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Tax paid (net)
Net cash from operating activities
Cash flows from investing activities
Acquisitions
Purchases of property, plant and equipment
Expenditure on internally developed intangible assets
Purchase of investments
Proceeds from disposals of property, plant and equipment
Gross proceeds from business disposals
Payments on business disposals
Dividends received from joint ventures
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders of the parent companies
Distributions to non-controlling interests
Increase in short term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Acquisition of non-controlling interest
Repurchase of ordinary shares
Purchase of shares by employee benefit trust
Proceeds on issue of ordinary shares
Net cash used in financing activities
93
2014
£m
2013
£m
1,851
(139)
13
(348)
1,377
(396)
(67)
(203)
(6)
10
78
(25)
44
(565)
(565)
(7)
232
589
(300)
(10)
(15)
(600)
(39)
45
(670)
1,943
(200)
5
(362)
1,386
(221)
(57)
(251)
(10)
6
311
(116)
22
(316)
(549)
(6)
169
184
(915)
(10)
–
(600)
–
125
(1,602)
Note
11
11
11
11
26
26
Increase/(decrease) in cash and cash equivalents
11
142
(532)
Movement in cash and cash equivalents
At start of year
Increase/(decrease) in cash and cash equivalents
Exchange translation differences
At end of year
132
142
2
276
641
(532)
23
132
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94
FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Goodwill
Intangible assets
Investments in joint ventures
Other investments
Property, plant and equipment
Deferred tax assets
Derivative financial instruments
Current assets
Inventories and pre-publication costs
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings
Taxation
Provisions
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Net pension obligations
Provisions
Liabilities associated with assets held for sale
Total liabilities
Net assets
Capital and reserves
Combined share capitals
Combined share premiums
Combined shares held in treasury
Translation reserve
Other combined reserves
Combined shareholders’ equity
Non-controlling interests
Total equity
Note
14
15
16
16
17
19
18
20
21
18
11
22
18
23
25
18
23
19
5
25
26
26
26
27
2014
£m
4,981
3,164
125
112
227
464
78
9,151
142
1,487
31
276
1,936
–
11,087
2,636
23
676
582
19
3,936
71
3,149
1,056
632
104
5,012
2
8,950
2,137
2013
£m
4,576
3,124
125
92
237
442
64
8,660
142
1,416
124
132
1,814
21
10,495
2,595
4
648
588
17
3,852
13
2,633
1,076
379
116
4,217
3
8,072
2,423
212
2,820
(1,107)
74
107
2,106
31
2,137
224
2,887
(1,464)
(137)
880
2,390
33
2,423
94118_Reed_AR_p091-134.indd 94
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RELX Group Annual Reports and Financial Statements 2014
Combined statement of changes in equity
Note
13
13
Balance at 1 January 2013
Total comprehensive income
for the year
Dividends paid
Issue of ordinary shares, net of
expenses
Repurchase of ordinary shares
Increase in share based
remuneration reserve
(net of tax)
Settlement of share awards
Exchange differences on
translation of capital and
reserves
Balance at 1 January 2014
Total comprehensive income
for the year
Dividends paid
Issue of ordinary shares,
net of expenses
Repurchase of ordinary shares
Cancellation of shares
Increase in share based
remuneration reserve
(net of tax)
Settlement of share awards
Acquisitions
Acquisition of non-controlling
interest
Exchange differences on
translation of capital and
reserves
Balance at 31 December 2014
Combined
share
capitals
£m
223
Combined
share
premiums
£m
2,727
Combined
shares held
in treasury
£m
(899)
Translation
reserve
£m
(23)
Other
combined
reserves
£m
Combined
shareholders’
equity
£m
Non-
controlling
interests
£m
252
2,280
34
–
–
1
–
–
–
–
224
–
–
2
–
(11)
–
–
–
–
–
–
124
–
–
–
36
–
–
–
(600)
–
40
(5)
2,887
(1,464)
–
–
43
–
–
–
–
–
–
–
–
–
(639)
930
–
27
–
–
(88)
–
1,174
(549)
–
–
–
–
(26)
(137)
137
–
–
–
–
–
–
–
–
–
–
48
(40)
(5)
880
703
(565)
–
–
(919)
48
(27)
–
(13)
1,086
(549)
125
(600)
48
–
–
2,390
840
(565)
45
(639)
–
48
–
–
5
(6)
–
–
–
–
–
33
5
(7)
–
–
–
–
–
1
(13)
(2)
(15)
(3)
212
(110)
2,820
39
(1,107)
74
74
–
107
–
2,106
1
31
1
2,137
95
Total
equity
£m
2,314
1,091
(555)
125
(600)
48
–
–
2,423
845
(572)
45
(639)
–
48
–
1
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96
FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
The Group’s combined financial statements are prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and as issued by the
International Accounting Standards Board (IASB). The combined
financial statements are prepared on a going concern basis, as
explained on page 73.
The Group accounting policies under IFRS are set out below.
Basis of preparation
The equalisation agreement between Reed Elsevier PLC and Reed
Elsevier NV has the effect that their shareholders can be regarded
as having the interests of a single economic group. For 2014 the
Group combined financial statements (“the combined financial
statements”) represent the combined interests of both sets of
shareholders and encompass the businesses of Reed Elsevier
Group plc and Elsevier Reed Finance BV and their subsidiaries,
associates and joint ventures, together with the two parent
companies, Reed Elsevier PLC and Reed Elsevier NV
(“the combined businesses”).
In preparing the combined financial statements, subsidiaries of
Reed Elsevier Group plc and Elsevier Reed Finance BV are
accounted for under the acquisition method and investments in
associates and joint ventures are accounted for under the equity
method. All transactions and balances between the combined
businesses are eliminated.
On acquisition of a subsidiary, or interest in an associate or joint
venture, fair values, reflecting conditions at the date of acquisition,
are attributed to the net assets, including identifiable intangible
assets acquired. This includes those adjustments made to bring
accounting policies into line with those of the combined
businesses. The results of subsidiaries sold or acquired are
included in the combined financial statements up to or from the
date that control passes from or to the combined businesses.
Non-controlling interests in the net assets of the combined
businesses are identified separately from combined
shareholders’ equity. Non-controlling interests consist of the
amount of those interests at the date of the original acquisition
and the non-controlling share of changes in equity since the date
of acquisition.
These financial statements form part of the statutory information
to be provided by Reed Elsevier PLC and Reed Elsevier NV, but are
not for a legal entity and do not include all the information required
to be disclosed by a company in its financial statements under the
UK Companies Act 2006 or the Dutch Civil Code. Additional
information is given in the Annual Reports and Financial
Statements of the parent companies set out on pages 147 to 185.
A list of principal businesses is set out on page 197.
Foreign exchange translation
The combined financial statements are presented in pounds
sterling. Additional information providing a translation into euros
of the primary combined financial statements and selected notes
is presented on pages 135 to 145.
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the transaction. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rate prevailing on the statement of financial
position date. Exchange differences arising are recorded in the
income statement other than where hedge accounting applies as
set out below.
Assets and liabilities of foreign operations are translated at
exchange rates prevailing on the statement of financial position
date. Income and expense items and cash flows of foreign
operations are translated at the average exchange rate for the
period. Significant individual items of income and expense and
cash flows in foreign operations are translated at the rate
prevailing on the date of transaction. Exchange differences arising
are classified as equity and transferred to the translation reserve.
When foreign operations are disposed of, the related cumulative
translation differences are recognised within the income
statement in the period.
The Group uses derivative financial instruments, primarily
forward contracts, to hedge its exposure to certain foreign
exchange risks. Details of the Group’s accounting policies in
respect of derivative financial instruments are set out below.
Revenue
Revenue represents the invoiced value of sales less anticipated
returns on transactions completed by performance, excluding
customer sales taxes.
Revenues are recognised for the various categories as follows:
subscriptions – on periodic despatch of subscribed product or
rateably over the period of the subscription where performance is
not measurable by despatch; transactional – on despatch or
occurrence of the transaction; and advertising – on publication or
over the period of online display.
Where sales consist of two or more independent components
whose value can be reliably measured, revenue is recognised on
each component as it is completed by performance, based on
attribution of relative value.
Employee benefits
The expense of defined benefit pension schemes and other
post-retirement employee benefits is determined using the
projected unit credit method and charged in the income statement
as an operating expense, based on actuarial assumptions
reflecting market conditions at the beginning of the financial year.
Actuarial gains and losses are recognised in full in the statement
of comprehensive income in the period in which they occur.
Past service costs are recognised immediately at the earlier of
when plan amendments or curtailments occur and when related
restructuring costs or termination benefits are recognised.
Settlements are recognised when they occur.
Net pension obligations in respect of defined benefit schemes are
included in the statement of financial position at the present value
of scheme liabilities, less the fair value of scheme assets. Where
schemes are in surplus, i.e. assets exceed liabilities, the net
pension assets are separately included in the statement of
financial position. Any net pension asset is limited to the extent that
the asset is recoverable through reductions in future contributions.
The expense of defined contribution pension schemes and other
employee benefits is charged in the income statement as incurred.
94118_Reed_AR_p091-134.indd 96
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RELX Group Annual Reports and Financial Statements 2014
97
Share based remuneration
The fair value of share based remuneration is determined at the
date of grant and recognised as an expense in the income
statement on a straight-line basis over the vesting period, taking
account of the estimated number of shares that are expected to
vest. Market based performance criteria are taken into account
when determining the fair value at the date of grant. Non-market
based performance criteria are taken into account when
estimating the number of shares expected to vest. The fair value
of share based remuneration is determined by use of a binomial
or Monte Carlo simulation model as appropriate. All the Group’s
share based remuneration is equity settled.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of an asset that takes a substantial
period of time to bring to use are capitalised. All other interest on
borrowings is expensed as incurred. The cost of issuing
borrowings is generally expensed over the period of borrowing so
as to produce a constant periodic rate of charge.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
which is recognised, in the same or a different period, outside profit
or loss (either in other comprehensive income, directly in equity, or
through a business combination) in which case the tax appears in
the same statement as the transaction that gave rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that
taxable profits will be available against which the deductible
temporary differences can be utilised, and are reviewed at the end
of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Deferred tax is not discounted.
Goodwill
On the acquisition of a subsidiary or business, the purchase
consideration is allocated between the net tangible and intangible
assets on a fair value basis, with any excess purchase
consideration representing goodwill. Goodwill arising on
acquisitions also includes amounts corresponding to deferred tax
liabilities recognised in respect of acquired intangible assets.
Goodwill is recognised as an asset and reviewed for impairment
when there is an indicator that the asset may be impaired and at
least annually. Any impairment is recognised immediately in the
income statement and not subsequently reversed.
On disposal of a subsidiary or business, the attributable amount
of goodwill is included in the determination of the profit or loss
on disposal.
Intangible assets
Intangible assets acquired as part of a business combination are
stated in the statement of financial position at their fair value as at
the date of acquisition, less accumulated amortisation. Internally
generated intangible assets are stated in the statement of
financial position at the directly attributable cost of creation of the
asset, less accumulated amortisation.
Intangible assets acquired as part of business combinations
comprise: market-related assets (e.g. trademarks, imprints,
brands); customer-related assets (e.g. subscription bases,
customer lists, customer relationships); editorial content;
software and systems (e.g. application infrastructure, product
delivery platforms, in process research and development);
contract-based assets (e.g. publishing rights, exhibition rights,
supply contracts); and other intangible assets. Internally
generated intangible assets typically comprise software and
systems development where an identifiable asset is created that is
probable to generate future economic benefits.
Intangible assets, other than brands and imprints determined to
have indefinite lives, are amortised on a straight-line basis over
their estimated useful lives. The estimated useful lives of
intangible assets with finite lives are as follows: market and
customer-related assets – 3 to 40 years; content, software and
other acquired intangible assets – 3 to 20 years; and internally
developed intangible assets – 3 to 10 years. Brands and imprints
determined to have indefinite lives are not amortised and are
subject to impairment review at least annually.
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98
FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
Property, plant and equipment
Property, plant and equipment are stated in the statement of
financial position at cost less accumulated depreciation. No
depreciation is provided on freehold land. Freehold buildings and
long leases are depreciated over their estimated useful lives up to a
maximum of 50 years. Short leases are written off over the duration
of the lease. Depreciation is provided on other assets on a straight-
line basis over their estimated useful lives as follows: leasehold
improvements – shorter of life of lease and 10 years; plant – 3 to 20
years; office furniture, fixtures and fittings – 5 to 10 years; computer
systems, communication networks and equipment – 3 to 7 years.
Investments
Investments, other than investments in joint arrangements and
associates, are stated in the statement of financial position at fair
value. Investments held as part of the venture capital portfolio are
classified as held for trading, with changes in fair value reported in
disposals and other non-operating items in the income statement.
All other investments are classified as available for sale with
changes in fair value recognised directly in equity until the
investment is disposed of or is determined to be impaired, at which
time the cumulative gain or loss previously recognised in equity is
brought into the net profit or loss for the period. All items
recognised in the income statement relating to investments, other
than investments in joint arrangements and associates, are
reported as disposals and other non-operating items.
Available for sale investments and venture capital investments
held for trading represent investments in listed and unlisted
securities. The fair value of listed securities is determined based
on quoted market prices, and of unlisted securities on
management’s estimate of fair value based on standard valuation
techniques, including market comparisons and discounts of future
cash flows, having regard to maximising the use of observable
inputs and adjusting for risk. Advice from valuation experts is used
as appropriate.
All joint arrangements are classified as joint ventures because the
Group shares joint control and has rights to the net assets of the
arrangements. Investments in joint ventures and associates are
accounted for under the equity method and stated in the statement
of financial position at cost as adjusted for post-acquisition
changes in the Group’s share of net assets, less any impairment
in value.
Impairment
At each statement of financial position date, the carrying amounts
of tangible and intangible assets and goodwill are reviewed to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount, which is the higher of value in use and fair
value less costs to sell, of the asset is estimated in order to
determine the extent, if any, of the impairment loss. Where the
asset does not generate cash flows that are independent from
other assets, value in use estimates are made based on the cash
flows of the cash generating unit to which the asset belongs.
Intangible assets with an indefinite useful life are tested for
impairment at least annually and whenever there is any indication
that the asset may be impaired.
If the recoverable amount of an asset or cash generating unit is
estimated to be less than its net carrying amount, the net carrying
amount of the asset or cash generating unit is reduced to its
recoverable amount. Impairment losses are recognised
immediately in the income statement in administration and
other expenses.
Inventories and pre-publication costs
Inventories and pre-publication costs are stated at the lower of
cost, including appropriate attributable overhead, and estimated
net realisable value. Pre-publication costs, representing costs
incurred in the origination of content prior to publication, are
expensed systematically reflecting the expected sales profile over
the estimated economic lives of the related products, generally up
to five years.
Leases
Assets held under leases which confer rights and obligations
similar to those attaching to owned assets are classified as assets
held under finance leases and capitalised within property, plant
and equipment or software and the corresponding liability to pay
rentals is shown net of interest in the statement of financial
position as obligations under finance leases. The capitalised value
of the assets is depreciated on a straight-line basis over the
shorter of the periods of the leases or the useful lives of the assets
concerned. The interest element of the lease payments is
allocated so as to produce a constant periodic rate of charge.
Operating lease rentals are charged to the income statement on a
straight-line basis over the period of the leases. Rental income
from operating leases is recognised on a straight-line basis over
the term of the relevant lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits
and other short-term highly liquid investments and are held in the
statement of financial position at fair value.
Assets held for sale
Assets of businesses that are available for immediate sale in their
current condition and for which a sales process is considered
highly probable to complete are classified as assets held for sale,
and are carried at the lower of carrying value and fair value less
costs to sell. Fair value is based on anticipated disposal proceeds,
typically derived from firm or indicative offers from potential
acquirers. Non-current assets are not amortised or depreciated
following their classification as held for sale. Liabilities of
businesses held for sale are also separately classified on the
statement of financial position.
Financial instruments
Financial instruments comprise investments (other than
investments in joint ventures or associates), trade receivables,
cash and cash equivalents, payables and accruals, borrowings
and derivative financial instruments.
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RELX Group Annual Reports and Financial Statements 2014
99
Investments (other than investments in joint ventures and
associates) are classified as either held for trading or available for
sale, as described above. (These investments are typically
classified as either Level 1 or 2 in the IFRS13 fair value hierarchy.)
The fair value of such investments is based on either quoted
market prices or other observable market inputs.
Trade receivables are carried in the statement of financial position
at invoiced value less allowance for estimated irrecoverable
amounts. Irrecoverable amounts are estimated based on the
ageing of trade receivables, experience and circumstance.
Borrowings and payables are recorded initially at fair value and
subsequently carried at amortised cost (other than fixed rate
borrowings in designated hedging relationships for which the
carrying amount of the hedged portion of the borrowings is
subsequently adjusted for the gain or loss attributable to the
hedged risk).
Derivative financial instruments are used to hedge interest rate
and foreign exchange risks. Changes in the fair value of derivative
financial instruments that are designated and effective as hedges
of future cash flows are recognised (net of tax) directly in equity in
the hedge reserve. If a hedged firm commitment or forecasted
transaction results in the recognition of a non-financial asset or
liability, then, at the time that the asset or liability is recognised,
the associated gains or losses on the derivative that had previously
been recognised in equity are included in the initial measurement
of the asset or liability. For hedges that do not result in the
recognition of an asset or a liability, amounts deferred in equity are
recognised in the income statement in the same period in which
the hedged item affects net profit or loss. Any ineffective portion
of hedges is recognised immediately in the income statement.
Derivative financial instruments that are not designated as
hedging instruments are classified as held for trading and
recorded in the statement of financial position at fair value,
with changes in fair value recognised in the income statement.
Where an effective hedge is in place against changes in the fair
value of fixed rate borrowings, the hedged borrowings are
adjusted for changes in fair value attributable to the risk being
hedged with a corresponding income or expense included in the
income statement within finance costs. The offsetting gains or
losses from remeasuring the fair value of the related derivatives
are also recognised in the income statement within finance costs.
When the related derivative expires, is sold or terminated, or no
longer qualifies for hedge accounting, the cumulative change in
fair value of the hedged borrowing is amortised in the income
statement over the period to maturity of the borrowing using the
effective interest method.
The fair values of interest rate swaps, interest rate options,
forward rate agreements and forward foreign exchange contracts
represent the replacement costs calculated using observable
market rates of interest and exchange. The fair value of long-term
borrowings is calculated by discounting expected future cash
flows at observable market rates. (These instruments are
accordingly classified as Level 2 in the IFRS13 fair value hierarchy.)
Cash flow hedge accounting is discontinued when a hedging
instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that time, any cumulative
gain or loss on the hedging instrument recognised in equity is
either retained in equity until the firm commitment or forecasted
transaction occurs, or, where a hedged transaction is no longer
expected to occur, is immediately credited or expensed in the
income statement.
Provisions
Provisions are recognised when a present obligation exists as a
result of a past event, the obligation is reasonably estimable, and
it is probable that settlement will be required. Provisions are
measured at the best estimate of the expenditure required to
settle the obligation at the statement of financial position date.
Shares held in treasury
Shares of Reed Elsevier PLC and Reed Elsevier NV that are
repurchased by the respective parent companies and not
cancelled are classified as shares held in treasury. The
consideration paid, including directly attributable costs, is
recognised as a deduction from equity. Shares of the parent
companies that are purchased by the Employee Benefit Trust are
also classified as shares held in treasury, with the cost recognised
as a deduction from equity.
Critical judgements and key sources of estimation uncertainty
The most significant accounting policies in determining the
financial condition and results of the combined businesses, and
those requiring the most subjective or complex judgement, relate
to the valuation of goodwill and intangible assets, capitalisation of
development spend, taxation and accounting for defined benefit
pension schemes.
Goodwill and acquired intangible assets
On acquisition of a subsidiary or business, the purchase
consideration is allocated between the net tangible and intangible
assets other than goodwill on a fair value basis, with any excess
purchase consideration representing goodwill. The valuation of
acquired intangible assets represents the estimated economic
value in use, using standard valuation methodologies, including
as appropriate, discounted cash flow, relief from royalty and
comparable market transactions. Acquired intangible assets are
capitalised and amortised systematically over their estimated
useful lives, subject to impairment review.
Appropriate amortisation periods are selected based on
assessments of the longevity of the brands and imprints, the
strength and stability of customer relationships, the market
positions of the acquired assets and the technological and
competitive risks that they face. Certain intangible assets in
relation to acquired science and medical publishing businesses
have been determined to have indefinite lives. The longevity of
these assets is evidenced by their long established and well
regarded brands and imprints, and their characteristically stable
market positions.
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100 FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
The carrying amounts of goodwill and indefinite lived intangible
assets in each business are reviewed for impairment at least
annually. The carrying amounts of all other intangible assets
are reviewed where there are indications of possible impairment.
An impairment review involves a comparison of the carrying value
of the asset with estimated values in use based on the latest
management cash flow projections, approved by the Board. Key
areas of judgement in estimating the values in use of businesses
are the growth in cash flows over a forecast period of up to five
years, the long-term growth rate assumed thereafter and the
discount rate applied to the forecast cash flows. A description of
the key assumptions and sensitivities is provided in note 14.
Development spend
Development spend embraces investment in new products and
other initiatives, ranging from the building of online delivery
platforms, to launch costs of new services, to building new
infrastructure applications. Launch costs and other ongoing
operating expenses of new products and services are expensed as
incurred. The costs of building product applications, platforms
and infrastructure are capitalised as intangible assets, where the
investment they represent has demonstrable value and the
technical and commercial feasibility is assured. Costs eligible for
capitalisation must be incremental, clearly identified and directly
attributable to a particular project. The resulting assets are
amortised over their estimated useful lives. Impairment reviews
are carried out at least annually. Judgement is required in the
assessment of the potential value of a development project, the
identification of costs eligible for capitalisation and the selection
of appropriate asset lives.
Taxation
The Group is subject to tax in numerous jurisdictions, giving rise
to complex tax issues that require management to exercise
judgement in making tax determinations. While the Group is
confident that tax returns are appropriately prepared and filed,
amounts are provided in respect of uncertain tax positions that
reflect the risk with respect to tax matters under active discussion
with tax authorities, or which are otherwise considered to involve
uncertainty. Amounts are provided using the best estimate of tax
expected to be paid based on a qualitative assessment of all
relevant factors. However, it is possible that at some future date
liabilities may be adjusted as a result of audits by taxing
authorities. Discussions with tax authorities relating to cross-
border transactions and other matters are ongoing. Although the
outcome of these discussions cannot be predicted, no significant
impact on the financial position of the Group is expected.
In addition, estimation of income taxes includes assessments of
the recoverability of deferred tax assets. Deferred tax assets are
only recognised to the extent that they are considered recoverable
based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised. The
recoverability of these assets is reassessed at the end of each
reporting period, and changes in recognition of deferred tax
assets will affect the tax liability in the period of that reassessment.
Pensions
The Group operates a number of defined benefit pension schemes
across the world. The largest schemes are in the UK, the US and
the Netherlands, as described in note 5 to the combined financial
statements. These schemes require management to exercise
judgement in estimating the ultimate cost of providing
post-employment benefits, especially given the length of each
scheme’s liabilities. The recognition of certain scheme liabilities is
also subject to judgement. Accounting for defined benefit pension
schemes involves judgement about uncertain events, including
the life expectancy of the members, salary and pension increases,
inflation, the future operation of each scheme and the rate at
which the future pension payments are discounted. Estimates for
these factors are used in determining the pension cost and
liabilities reported in the financial statements. The estimates
made around future developments of each of the critical
assumptions are made in conjunction with independent actuaries.
Each scheme is subject to a periodic review by independent
actuaries. Information regarding some of the assumptions used
for valuation is provided in note 5 to the combined financial
statements, together with a sensitivity analysis.
Other significant accounting policies
The accounting policies in respect of revenue recognition,
pre-publication costs, and property provisioning are also
significant in determining the financial condition and results of the
combined businesses, although the application of these policies is
more straightforward.
Revenue recognition policies, while an area of management focus,
are generally straightforward in application as the timing of
product or service delivery and customer acceptance for the
various revenue types can be readily determined. Allowances for
product returns are deducted from revenues based on historical
return rates. Where sales consist of two or more components that
operate independently, revenue is recognised as each component is
completed by performance, based on attribution of relative value.
Pre-publication costs incurred in the creation of content prior to
production and publication are typically deferred and expensed
over their estimated useful lives based on sales profiles. Such
costs typically comprise direct internal labour costs and
externally commissioned editorial and other fees. Estimated
useful lives generally do not exceed five years. Annual reviews are
carried out to assess the recoverability of carrying amounts.
The Group has exposures to sub-lease shortfalls in respect of
certain property leases for periods up to 2024. Provisions are
recognised for net liabilities expected to arise on these exposures.
Estimation of the provisions requires judgement in respect of future
head lease costs, sub-lease income and the length of vacancy
periods. The charge for property provisions was nil (2013: nil).
Further information is provided in note 24 to the combined
financial statements.
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101
Standards and amendments effective for the year
The interpretations and amendments to IFRS effective for 2014
have not had a significant impact on the Group’s accounting
policies or reporting.
Standards, amendments and interpretations not yet effective
New accounting standards and amendments and their expected
impact on the future accounting policies and reporting of the
Group are set out below.
IFRS15 – Revenue from Contracts with Customers (effective for
the 2017 financial year). The new standard provides a single point
of reference for revenue recognition replacing a range of different
revenue accounting standards, interpretations and guidance.
The Group is in the process of assessing the impact of this new
standard.
IFRS9 – Financial Instruments (effective for the 2018 financial year).
The standard replaces the existing classification and measurement
requirements in IAS39 for financial assets by requiring entities to
classify them as being measured either at amortised cost or fair
value depending on the business model and contractual cash flow
characteristics of the asset. For financial liabilities, IFRS9 requires
an entity choosing to measure a liability at fair value to present the
portion of the change in its fair value due to changes in the entity’s
own credit risk in the other comprehensive income rather than the
income statement. Adoption of the standard is not expected to
have a significant impact on the measurement, presentation or
disclosure of financial assets and liabilities in the combined
financial statements.
Additionally, a number of amendments and interpretations have
been issued which are not expected to have any significant impact
on the Group’s accounting policies and reporting.
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102 FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
1 Segment analysis
The Group is a world leading provider of professional information solutions serving four market segments: Scientific, Technical &
Medical, providing information and tools to help its customers improve scientific and healthcare outcomes; Risk & Business
Information, providing data, analytics and insight that enables customers to evaluate and manage risk and develop market intelligence;
Legal, providing legal, tax and regulatory news and business information to legal, corporate, government, accounting and academic
markets; and Exhibitions, organising exhibitions and conferences.
The Group’s reported segments are based on the internal reporting structure and financial information provided to the Boards. During
2014, Risk Solutions and Business Information have been combined into one business area, having previously operated separately.
Accordingly, they are now presented as a single operating segment. Comparative figures have been presented as if the businesses had
operated on a combined basis in the prior year.
Following a review of activities, assets and costs across the business, the Group introduced a new method for the allocation of corporate
and shared costs from 1 January 2014. Previously unallocated items and costs relating to shared activities and resources have been
attributed to the business segments on the basis of usage and benefits derived. This new allocation reflects an increased level of shared
resources and capitalised costs. Comparative adjusted operating profit and operating profit figures have been restated as if these
allocation methods had operated in the prior year. This reflects the presentation of financial information provided to the Boards.
Adjusted operating profit is the key segmental profit measure used by the Group in assessing performance. Adjusted operating profit is
reconciled to operating profit in note 10.
ANALYSIS BY BUSINESS SEGMENT
Revenue
Operating profit
Adjusted operating profit
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Sub-total
Corporate costs
Total
2014
£m
2,048
1,439
1,396
890
5,773
–
5,773
2013
£m
2,126
1,480
1,567
862
6,035
–
6,035
2014
£m
684
377
173
174
1,408
(6)
1,402
Restated
2013
£m
693
369
161
158
1,381
(5)
1,376
2014
£m
762
506
260
217
1,745
(6)
1,739
Restated
2013
£m
787
507
250
210
1,754
(5)
1,749
Share of post-tax results of joint ventures of £36m (2013: £29m) included in operating profit comprises £16m (2013: £6m) relating to
Legal and £20m (2013: £23m) relating to Exhibitions.
ANALYSIS OF REVENUE BY GEOGRAPHICAL ORIGIN
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY GEOGRAPHICAL MARKET
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2014
£m
2,884
1,013
636
686
554
5,773
2014
£m
2,878
455
153
1,053
1,234
5,773
2013
£m
3,103
985
656
698
593
6,035
2013
£m
3,082
443
166
1,074
1,270
6,035
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RELX Group Annual Reports and Financial Statements 2014
103
1 Segment analysis continued
ANALYSIS OF REVENUE BY FORMAT
Electronic
Print
Face-to-face
Total
ANALYSIS OF REVENUE BY TYPE
Subscriptions
Transactional
Advertising
Total
2014
£m
3,839
1,012
922
5,773
2014
£m
2,966
2,672
135
5,773
2013
£m
3,971
1,168
896
6,035
2013
£m
3,112
2,683
240
6,035
ANALYSIS BY BUSINESS SEGMENT
Expenditure on
acquired goodwill and
intangible assets
Capital
expenditure
additions
Amortisation
of acquired
intangible assets
Depreciation and
other amortisation
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Total
2014
£m
25
330
48
23
426
2013
£m
50
169
15
56
290
2014
£m
56
53
145
27
281
2013
£m
93
43
170
15
321
2014
£m
79
116
57
34
286
Restated
2013
£m
86
128
64
40
318
2014
£m
94
34
94
15
237
Restated
2013
£m
100
33
101
15
249
Capital expenditure comprises additions to property, plant and equipment and internally developed intangible assets. Amortisation of
acquired intangible assets includes amounts in respect of joint ventures of £3m (2013: nil) in Legal and £1m (2013: £1m) in Exhibitions.
Other than the depreciation and amortisation above, non-cash items include £32m (2013: £31m) relating to the recognition of share
based remuneration, comprising £12m (2013: £11m) in Scientific, Technical & Medical, £8m (2013: £8m) in Risk & Business Information,
£7m (2013: £7m) in Legal and £5m (2013: £5m) in Exhibitions.
ANALYSIS OF NON-CURRENT ASSETS BY GEOGRAPHICAL LOCATION
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2014
£m
6,569
701
109
816
414
8,609
2013
£m
6,291
584
125
753
401
8,154
Non-current assets by geographical location exclude amounts relating to deferred tax and derivative financial instruments.
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104
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
2 Operating profit
Operating profit is stated after charging/(crediting) the following:
Staff costs
Wages and salaries
Social security costs
Pensions
Share based remuneration
Total staff costs
Depreciation and amortisation
Amortisation of acquired intangible assets
Share of joint ventures’ amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Total depreciation and amortisation
Other expenses and income
Pre-publication costs, inventory expenses and other cost of sales
Operating lease rentals expense
Operating lease rentals income
The amortisation of acquired intangible assets is included within administration and other expenses.
3 Auditors’ remuneration
Auditors’ remuneration
Payable to the auditors of the parent companies
Payable to the auditors of the operating and financing businesses
For audit services
Audit-related assurance services
Tax services
Due diligence and other transaction-related services
For non-audit services
Total auditors’ remuneration
Note
5
6
15
15
17
2014
£m
1,415
167
95
32
1,709
282
4
158
79
523
2013
£m
1,508
175
61
31
1,775
317
1
160
89
567
2,006
91
(8)
2,118
108
(10)
2014
£m
2013
£m
0.6
4.2
4.8
0.5
1.0
0.3
1.8
6.6
0.6
4.3
4.9
0.4
1.8
–
2.2
7.1
Amounts payable to the auditors of the operating and financing businesses include amounts for the review and testing of internal
controls over financial reporting in accordance with the US Sarbanes-Oxley Act. Non-audit services performed in the Netherlands or by
Deloitte BV are limited to audit-related assurance services. The Group’s policy on auditor independence is set out in the Report of the
Audit Committees on page 90.
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RELX Group Annual Reports and Financial Statements 2014
105
4 Personnel
NUMBER OF PEOPLE EMPLOYED: FULL TIME EQUIVALENTS
Business segment
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Sub-total
Corporate/shared functions
Total
Geographical location
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
5 Pension schemes
At 31 December
Average during the year
2014
2013
2014
2013
7,000
7,400
9,500
3,700
27,600
900
28,500
13,300
4,300
1,600
2,800
6,500
28,500
6,700
7,200
10,000
3,400
27,300
900
28,200
13,900
4,100
1,600
2,800
5,800
28,200
6,900
7,300
9,600
3,500
27,300
900
28,200
13,400
4,200
1,600
2,800
6,200
28,200
6,900
7,700
10,400
3,300
28,300
900
29,200
14,800
4,100
1,600
3,100
5,600
29,200
A number of pension schemes are operated around the world. Historically, the largest schemes have been local versions of the defined
benefit type with assets held in separate trustee administered funds. The largest defined benefit schemes are in the UK, the US and
the Netherlands.
The UK scheme is a final salary scheme and is closed to new hires. Members accrue a portion of their final pensionable earnings based
on the number of years of service. The US scheme is a cash balance scheme and is closed to new hires. Members earn pay credits
dependent on age and years of service up to certain limits which are added to an account balance that accrues interest at specified
minimum rates. The Netherlands scheme is a career average salary scheme and remains open to new hires. Members accrue a portion
of their current salary at a rate calculated to enable them to reach a pension level based on their average salary.
Each of the major defined benefit schemes is administered by a separate fund that is legally separated from the Group. The trustees of
the pension funds in the UK and the Netherlands and plan fiduciaries of the US scheme are required by law to act in the interest of the
funds’ beneficiaries. In the UK and in the Netherlands the trustees of the pension fund are responsible for the investment policy with
regard to the assets of the fund. The boards of trustees consist of an equal number of company appointed and member nominated
Directors. In the US, the fiduciary duties for the scheme are allocated between committees which are staffed by senior employees of the
Group; the investment committee has the primary responsibility for the investment and management of plan assets.
The funding of the Group’s major schemes reflects the different rules within each jurisdiction.
In the UK the level of funding is determined by statutory triennial actuarial valuations in accordance with pensions legislation. Where the
scheme falls below 100% funded status, the Group and the scheme trustees must agree on how the deficit is to be remedied. The UK
Pensions Regulator has significant powers and sets out in codes and guidance the parameters for scheme funding.
The US scheme has an annual statutory valuation which forms the basis for establishing the employer contribution each year (subject to
ERISA and IRS minimums). Should the statutory funded status fall to below 100%, the US Pensions Protection Act requires the deficit to
be rectified with additional contributions over a seven year period.
In the Netherlands, on a regulatory basis, with effect from 1 January 2015, the scheme funding level is determined by the new Financial
Assessment Framework (nFTK). The nFTK introduces, inter alia, a 12 month average funding ratio, higher buffer requirements and
stricter indexation than under previous legislation, and a 10 year recovery plan in the event of funding shortfalls. In case of a shortfall in
the funding level, the first recovery plans are required to be filed with the Dutch Central Bank on 1 July 2015. On a contractual basis, the
employer contribution is capped at 11.9% of salary.
Total regular employer contributions to defined benefit pension schemes in respect of 2015 are expected to be approximately £65m.
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106
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
5 Pension schemes continued
The pension expense recognised within operating expense is:
Defined benefit pension expense
Defined contribution pension expense
Total
2014
£m
48
47
95
2013
£m
14
47
61
The amounts recognised in the income statement in respect of defined benefit pension schemes during the year are presented by major
scheme as follows:
Service cost
Settlements and past service credits
Defined benefit pension expense
Net interest on net defined benefit obligation
Net defined benefit pension expense
2014
2013
UK
£m
31
–
31
8
39
US
£m
18
–
18
4
22
NL
£m
14
(15)
(1)
3
2
Total
£m
63
(15)
48
15
63
UK
£m
29
–
29
6
35
US
£m
29
(51)
(22)
9
(13)
NL
£m
15
(8)
7
4
11
Total
£m
73
(59)
14
19
33
Net interest on net defined benefit pension scheme liabilities is presented within net finance costs in the income statement. Service cost,
including settlements, past service credits and curtailments is presented within operating expenses.
Settlements and past service credits in 2014 relate to plan design changes and a reduction in accrued benefits in respect of the scheme
in the Netherlands. Settlements and past service credits recognised in 2013 principally relate to plan design changes and the transfer
out of certain deferred members in the US scheme and a reduction in accrued benefits in respect of the scheme in the Netherlands.
The significant valuation assumptions, determined for each major scheme in conjunction with the respective independent actuaries
are presented below. The net defined benefit pension expense for each year is based on the assumptions and scheme valuations set at
31 December of the prior year.
As at 31 December
Discount rate
Inflation
UK
3.75%
2.90%
2014
US
4.25%
2.50%
NL
2.30%
2.00%
UK
4.60%
3.25%
2013
US
5.05%
3.00%
NL
3.60%
2.00%
Discount rates are set by reference to high-quality corporate bond yields.
Mortality assumptions make allowance for future improvements in longevity and have been determined by reference to applicable
mortality statistics. The average life expectancy assumptions are set out below:
Male average life expectancy (at 31 December)
Member currently aged 60 years
Member currently aged 45 years
Female average life expectancy (at 31 December)
Member currently aged 60 years
Member currently aged 45 years
2014
US
87
87
2014
US
89
90
UK
90
92
UK
89
91
NL
86
87
NL
89
90
2013
US
84
83
2013
US
86
85
UK
90
92
UK
89
91
NL
86
87
NL
89
89
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RELX Group Annual Reports and Financial Statements 2014
107
5 Pension schemes continued
The amount recognised in the statement of financial position in respect of defined benefit pension schemes at the start and end of the
year and the movements during the year were as follows:
Defined benefit obligation
At start of year
Service cost
Settlements and past service credits
Interest on pension scheme liabilities
Actuarial (loss)/gain on financial
assumptions
Actuarial (loss)/gain arising from
experience assumptions
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
Fair value of scheme assets
At start of year
Interest income on plan assets
Return on assets excluding amounts
included in interest income
Contributions by employer
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
2014
2013
UK
£m
(2,882)
(31)
–
(130)
US
£m
(762)
(18)
–
(39)
NL
£m
Total
£m
UK
£m
(716)
(14)
15
(25)
(4,360)
(63)
15
(194)
(2,654)
(29)
–
(122)
US
£m
(922)
(29)
51
(41)
NL
£m
(696)
(15)
8
(25)
Total
£m
(4,272)
(73)
59
(188)
(339)
(107)
(120)
(566)
(173)
86
18
(69)
26
(7)
96
–
(3,267)
2,691
122
110
36
7
(96)
–
2,870
(3)
–
52
(55)
(932)
676
35
72
31
–
(52)
48
810
5
(5)
27
55
(778)
614
22
90
9
5
(27)
(48)
665
28
(12)
175
–
(4,977)
3,981
179
272
76
12
(175)
–
4,345
8
(6)
94
–
(2,882)
2,516
116
111
36
6
(94)
–
2,691
(10)
–
93
10
(762)
710
32
4
33
–
(93)
(10)
676
(3)
(5)
19
(17)
(716)
580
21
(1)
14
5
(19)
14
614
(5)
(11)
206
(7)
(4,360)
3,806
169
114
83
11
(206)
4
3,981
Net defined benefit obligation
(397)
(122)
(113)
(632)
(191)
(86)
(102)
(379)
* included in benefits paid are settlements of nil (2013: £52m).
As at 31 December 2014, the defined benefit obligations comprise £4,784m (2013: £4,200m) in relation to funded schemes and £193m
(2013: £160m) in relation to unfunded schemes.
The weighted average duration of defined benefit scheme liabilities is 19 years in the UK (2013: 19 years), 15 years in the US (2013:16
years) and 24 years in the Netherlands (2013:21 years). Deferred tax assets of £161m (2013: £104m) are recognised in respect of the
pension scheme deficits.
Amounts recognised in the statement of comprehensive income are set out below:
Gains and losses arising during the year:
Experience gains/(losses) on scheme liabilities
Experience gains on scheme assets
Actuarial (losses)/gains arising on the present value of scheme liabilities due to changes in:
– discount rates
– inflation
– other actuarial assumptions
Net cumulative losses at start of year
Net cumulative losses at end of year
2014
£m
28
272
(773)
159
48
(266)
(475)
(741)
2013
£m
(5)
114
78
(171)
24
40
(515)
(475)
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108
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
5 Pension schemes continued
The major categories and fair values of scheme assets at the end of the reporting period are as follows:
FAIR VALUE OF SCHEME ASSETS
2014
2013
Equities
Government bonds
Corporate bonds
Property funds
Cash
Other
Total
UK
£m
1,260
1,249
–
270
74
17
2,870
US
£m
263
70
455
–
2
20
810
NL
£m
226
261
143
30
5
–
665
Total
£m
1,749
1,580
598
300
81
37
4,345
UK
£m
1,351
1,089
–
147
87
17
2,691
US
£m
174
68
411
–
4
19
676
NL
£m
223
261
93
34
3
–
614
Total
£m
1,748
1,418
504
181
94
36
3,981
The actual return on scheme assets for the year ended 31 December 2014 was £451m (2013: £283m).
Assets and obligations associated with the schemes are sensitive to changes in the market values of assets and the market-related
assumptions used to value scheme liabilities. In particular, adverse changes to asset values, discount rates or inflation could increase
future pension costs and funding requirements.
Typically the Group’s schemes are exposed to: investment risks, whereby actual rates of return on plan assets may be below those rates
used to determine the defined benefit obligations and interest rate risks, whereby scheme deficits may increase if bond yields in the UK,
the US and the Netherlands decline and are not offset by returns in government and corporate bond portfolios. The schemes are also
exposed to other risks such as unanticipated future increases in: member mortality patterns; inflation; and future salaries, all
potentially leading to an increase in scheme liabilities particularly in the Netherlands which is the only major scheme which remains
open to new members.
Investment policies of each scheme are intended to ensure continuous payment of defined benefit pensions in the short term and long
term. Efforts are made to limit risks on marketable securities by adopting investment policies that diversify assets across geographies
and among equities, government and corporate bonds, property funds and cash. Asset allocations are dependent on a variety of factors
including the duration of scheme liabilities and the statutory funded status of the plan.
All equities and government and corporate bonds have quoted prices in active markets.
Sensitivity analysis
The valuation of the Group’s pension scheme liabilities involves significant actuarial assumptions, being the life expectancy of
the members, inflation and the rate at which the future pension payments are discounted. Differences arising from actual experience
or future changes in assumptions may materially affect future pension charges. In particular, changes in assumptions for discount
rates, inflation and life expectancies that are reasonably possible would have the following approximate effects on the defined benefit
pension obligations:
Increase/decrease of 0.25% in discount rate
Increase/decrease of 0.25% in the expected inflation rate
Increase/decrease of one year in assumed life expectancy
£m
233
121
131
The above analysis has been calculated on the same basis used to determine the defined benefit obligation recognised in the statement
of financial position. There has been no change in the methods used to prepare the analysis compared with prior years. This sensitivity
analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the above
assumptions would occur in isolation of one another as some of the assumptions may be correlated.
94118_Reed_AR_p091-134.indd 108
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RELX Group Annual Reports and Financial Statements 2014
109
6 Share based remuneration
The Group provides a number of share based remuneration schemes to Directors and employees. The principal share based
remuneration schemes are the Executive Share Option Schemes (ESOS), the Long Term Incentive Plan (LTIP), the Reed Elsevier Growth
Plan (REGP) (discontinued ater 2014), the Retention Share Plan (RSP) and the Bonus Investment Plan (BIP). Share options granted under
ESOS and LTIP are exercisable after three years and up to 10 years from the date of grant at a price equivalent to the market value of the
respective shares at the date of grant. Conditional shares granted under ESOS, LTIP, RSP and BIP are exercisable after three years for nil
consideration if conditions are met. Conditional shares granted under REGP are exercisable for nil consideration if conditions are met
after three and five years. Other awards principally relate to all employee share based saving schemes in the UK and the Netherlands.
Share based remuneration awards are, other than upon retirement or in exceptional circumstances, subject to the condition that the
employee remains in employment at the time of exercise.
Conditional shares granted under LTIP, REGP, RSP and BIP between 2011 and 2014 are subject to the achievement of growth targets of
Reed Elsevier PLC and Reed Elsevier NV adjusted earnings per share measured at constant exchange rates as well as the achievement
of a targeted percentage return on invested capital of Reed Elsevier PLC and Reed Elsevier NV. LTIP grants between 2011 and 2014 and
REGP grants in 2013 are also variable subject to the achievement of a total shareholder return performance target.
The weighted average fair value per award is based on full vesting on achievement of non-market-related performance conditions and
stochastic models for market-related components. The conditional shares and option awards are recognised in the income statement
over the vesting period, being between three and five years, on the basis of expected performance against the non-market-related
conditions, with the fair value related to market-related components unchanging. Further details of performance conditions are given in
the Directors’ Remuneration Report on pages 75 to 88.
2014 GRANTS
Share options
– ESOS
– Other
Total share options
Conditional shares
– ESOS
– LTIP
– RSP
– BIP
Total conditional shares
2013 GRANTS
Share options
– ESOS
– Other
Total share options
Conditional shares
– ESOS
– LTIP
– RSP
– REGP
– BIP
Total conditional shares
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Weighted
average fair
value per
award
£
Number of
shares
’000
Weighted
average fair
value per
award
£
Number of
shares
’000
1,221
1,064
2,285
365
1,031
131
769
2,296
0.98
1.31
1.13
8.27
7.81
9.90
9.23
8.48
863
314
1,177
258
729
94
483
1,564
1.13
0.90
1.07
11.24
10.85
14.18
12.88
11.74
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Weighted
average fair
value per
award
£
Weighted
average fair
value per
award
£
Number of
shares
’000
Number of
shares
’000
1,521
645
2,166
524
1,338
10
322
987
3,181
1.12
1.29
1.17
6.51
6.14
7.35
6.49
7.40
6.63
1,058
257
1,315
365
930
7
450
615
2,367
1.52
1.10
1.44
9.28
8.90
10.65
9.34
10.69
9.51
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110
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
6 Share based remuneration continued
The main assumptions used to determine the fair values, which have been established with advice from and data provided by
independent actuaries, are set out below:
ASSUMPTIONS FOR GRANTS MADE DURING THE YEAR
Weighted average share price at date of grant
– ESOS
– LTIP
– RSP
– BIP
– REGP
– Other
Expected share price volatility
Expected option life
Expected dividend yield
Risk free interest rate
Expected lapse rate
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
2014
2013
2014
2013
£9.28
£9.29
£9.90
£9.23
–
£8.86
19%
4 years
3.8%
1.5%
2-5%
£7.35
£7.35
£7.35
£7.39
£7.76
£7.45
28%
4 years
4.1%
0.5%
2-5%
€15.92
€15.94
€17.50
€15.90
–
€15.63
19%
4 years
4.5%
0.6%
2-4%
€12.53
€12.54
€12.53
€12.53
€13.15
€11.89
28%
4 years
4.7%
0.4%
2-4%
Expected share price volatility has been estimated based on relevant historical data in respect of the Reed Elsevier PLC and Reed
Elsevier NV ordinary share prices. Expected share option life has been estimated based on historical exercise patterns in respect of
Reed Elsevier PLC and Reed Elsevier NV share options.
The share based remuneration awards outstanding as at 31 December 2014, in respect of both Reed Elsevier PLC and Reed Elsevier NV
ordinary shares, are set out below:
SHARE OPTIONS
Outstanding at 1 January 2013
Granted
Exercised
Forfeited
Expired
Outstanding at 1 January 2014
Granted
Exercised
Forfeited
Expired
Outstanding at 31 December 2014
Exercisable at 31 December 2013
Exercisable at 31 December 2014
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Number of
shares under
option
’000
19,335
2,166
(9,102)
(112)
(560)
Weighted
average
exercise
price
(pence)
529
694
542
535
537
Number of
shares under
option
’000
15,582
1,315
(7,628)
(167)
(462)
11,727
2,285
(3,318)
(832)
(535)
9,327
5,150
3,163
549
827
520
514
577
629
537
550
8,640
1,177
(2,740)
(348)
(573)
6,156
5,535
3,480
Weighted
average
exercise
price
(€)
10.63
12.41
10.72
11.30
11.30
10.77
15.86
11.13
10.28
10.28
11.66
11.09
11.11
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RELX Group Annual Reports and Financial Statements 2014
111
6 Share based remuneration continued
CONDITIONAL SHARES
Outstanding at 1 January 2013
Granted
Vested
Forfeited/lapsed
Outstanding at 1 January 2014
Granted
Vested
Forfeited/lapsed
Outstanding at 31 December 2014
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Number of shares
’000
Number of shares
’000
11,812
3,181
(3,256)
(1,395)
10,342
2,296
(2,772)
(1,236)
8,630
6,706
2,367
(1,966)
(923)
6,184
1,564
(1,591)
(622)
5,535
The weighted average share price at the date of exercise of share options and vesting of conditional shares during 2014 was 885p
(2013: 761p) for Reed Elsevier PLC ordinary shares and €15.03 (2013: €13.15) for Reed Elsevier NV ordinary shares.
RANGE OF EXERCISE PRICES FOR OUTSTANDING SHARE OPTIONS
2014
2013
Reed Elsevier PLC ordinary shares (pence)
401-450
451-500
501-550
551-600
601-650
701-750
801-850
851-900
901-950
951-1000
Total
Reed Elsevier NV ordinary shares (euro)
7.01-8.00
8.01-9.00
9.01-10.00
10.01-11.00
11.01-12.00
12.01-13.00
13.01-14.00
14.01-15.00
15.01-16.00
16.01-17.00
17.01-18.00
Total
Weighted
average
remaining
period until
expiry
(years)
Number of
shares under
option
’000
Number of
shares under
option
’000
Weighted
average
remaining
period until
expiry
(years)
834
451
3,184
576
788
2,301
10
2
1,088
93
9,327
24
1,024
1,459
60
587
1,424
87
406
976
15
94
6,156
1.6
5.4
5.5
2.8
2.8
6.3
8.6
8.9
9.3
9.7
5.4
4.0
5.7
6.4
2.8
1.6
6.5
3.7
3.0
9.2
9.0
9.5
6.0
1,772
1,161
5,284
695
1,338
1,462
10
2
3
–
11,727
41
1,834
1,813
619
1,670
1,864
134
663
2
–
–
8,640
1.9
4.2
5.6
3.9
4.0
9.4
9.6
9.9
9.0
–
5.1
5.0
6.8
7.2
1.4
2.3
7.1
4.7
3.1
9.9
–
–
5.4
Share options are expected, upon exercise, to be met principally by the issue of new ordinary shares but may also be met from shares held
by the Employee Benefit Trust (EBT) (see note 26). Conditional shares will be met from shares held by the EBT.
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112
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
7 Net finance costs
Interest on short-term bank loans, overdrafts and commercial paper
Interest on term debt
Interest on obligations under finance leases
Total borrowing costs
Losses on loans and derivatives not designated as hedges
Net financing charge on defined benefit pension schemes
Finance costs
Interest on bank deposits
Gains on loans and derivatives not designated as hedges
Finance income
Net finance costs
2014
£m
(13)
(134)
–
(147)
(7)
(15)
(169)
7
–
7
(162)
2013
£m
(11)
(168)
(1)
(180)
(7)
(19)
(206)
4
6
10
(196)
A net loss of £52m (2013: £1m gain) on interest rate derivatives designated as cash flow hedges was recognised directly in equity. This
included losses of £54m (2013: nil) related to foreign exchange movements on debt hedges, which were reclassified immediately to the
income statement and offset £54m (2013: nil) of foreign exchange gains on the related debt. The remaining gain of £2m (2013: £1m)
recognised in equity may be reclassified to the income statement in future periods. Including the £54m (2013: nil) of foreign exchange
losses, losses of £56m (2013: £3m) in total were transferred from the hedge reserve in the period.
8 Disposals and other items
Revaluation of held for trading investments
(Loss)/gain on disposal of businesses and assets held for sale
Net (losses)/gains on disposals and other items
9 Taxation
Current tax
United Kingdom
The Netherlands
Rest of world
Total current tax charge
Deferred tax
Tax expense
2014
£m
8
(19)
(11)
2014
£m
(36)
(93)
(228)
(357)
88
(269)
2013
£m
5
11
16
2013
£m
(50)
(80)
(222)
(352)
271
(81)
The decrease in the UK current tax charge over the year reflects the reduction in the UK statutory rate of tax, and the settlement of prior
year tax matters.
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RELX Group Annual Reports and Financial Statements 2014
113
9 Taxation continued
The net tax expense charged on profit before tax differs from the theoretical amount that would arise using the weighted average of tax
rates applicable to accounting profits and losses of the consolidated entities, as follows:
Profit before tax
Tax at average applicable rates
Tax on share of results of joint ventures
Expenses not deductible for tax purposes and US state taxes
Non-taxable costs of share based remuneration
Non-deductible disposal-related gains and losses
Tax losses of the period not recognised
Recognition and utilisation of tax losses that arose in prior years
Deferred tax credit on the alignment of business assets
Other adjustments in respect of prior periods
Deferred tax effect of changes in tax rates
Tax expense
2014
£m
1,229
(292)
21
(26)
–
(22)
(4)
4
–
50
–
(269)
2013
£m
1,196
(280)
10
(38)
3
(22)
(4)
9
221
24
(4)
(81)
The weighted average applicable tax rate for the year was 23.7% (2013: 23.4%). This increase is caused by a change in the relative
profitability of the Group entities in the countries in which they operate, partially offset by the impact of the reduction in the tax rate of the
UK (see below).
During 2013, the Group aligned certain business assets with their global management structure. As a result of this alignment the tax
deductible value of these assets was updated to market value. This resulted in a deferred tax credit of £221m which was excluded from
adjusted earnings along with other deferred tax assets from intangible assets.
The following tax has been recognised in other comprehensive income or directly in equity during the year:
Tax on items that will not be reclassified to profit or loss
Tax on actuarial movements on defined benefit pension schemes
Tax on items that may be reclassified to profit or loss
Tax on fair value movements on cash flow hedges
Net tax credit/(debit) recognised in other comprehensive income
Tax credit on share based remuneration recognised directly in equity
2014
£m
2013
£m
63
63
13
13
76
20
(24)
(24)
(14)
(14)
(38)
20
A number of changes to the UK corporation tax system, including reductions of the main rate of corporation tax from 23% to 21% with
effect from 1 April 2014, and from 21% to 20% with effect from 1 April 2015, were substantively enacted on 2 July 2013. The Group has
measured its UK deferred tax assets and liabilities at the end of the reporting period at 20% (2013: 20%).
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114
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
10 Adjusted figures
The Group uses adjusted figures as additional performance measures. Adjusted operating profit excludes amortisation of acquired
intangible assets, acquisition-related costs and the share of taxes in joint ventures. Acquisition-related costs relate to acquisition
integration, transaction-related fees, and those elements of deferred and contingent consideration required to be expensed under IFRS.
Adjusted profit before tax also excludes disposal-related and other non-operating items and the net financing charge or credit on
defined benefit pension schemes. The adjusted tax charge excludes the tax effect of these adjusting items and movements on deferred
tax assets and liabilities related to goodwill and acquired intangible assets. It includes the benefit of tax amortisation where available on
goodwill and acquired intangible assets. Adjusted cash flow is measured after net capital expenditure and dividends from joint ventures,
but before payments in relation to prior year exceptional restructuring programmes and acquisition-related costs. Adjusted figures are
derived as follows:
Operating profit
Adjustments:
Amortisation of acquired intangible assets
Acquisition-related costs
Reclassification of tax in joint ventures
Adjusted operating profit
Profit before tax
Adjustments:
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Adjusted profit before tax
Tax charge
Adjustments:
Deferred tax movements on goodwill and acquired intangible assets
Tax on acquisition-related costs
Reclassification of tax in joint ventures
Tax on net financing charge on defined benefit pension schemes
Tax on disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted tax charge
Net profit attributable to parent companies’ shareholders
Adjustments (post tax):
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted net profit attributable to parent companies’ shareholders
Cash generated from operations
Dividends received from joint ventures
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Expenditure on internally developed intangible assets
Payments in relation to exceptional restructuring costs
Payments in relation to acquisition-related costs
Adjusted cash flow
2014
£m
2013
£m
1,402
1,376
286
30
21
1,739
318
43
12
1,749
1,229
1,196
286
30
21
15
11
1,592
318
43
12
19
(16)
1,572
(269)
(81)
(6)
(9)
(21)
(4)
3
(68)
(374)
7
(12)
(12)
(6)
34
(300)
(370)
955
1,110
280
21
11
14
(68)
1,213
1,851
44
(67)
10
(203)
–
27
1,662
325
31
13
18
(300)
1,197
1,943
22
(57)
6
(251)
12
28
1,703
* Movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
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RELX Group Annual Reports and Financial Statements 2014
115
11 Statement of cash flows
RECONCILIATION OF OPERATING PROFIT BEFORE JOINT VENTURES TO CASH GENERATED FROM OPERATIONS
Operating profit before joint ventures
Amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Share based remuneration
Total non-cash items
Decrease in inventories and pre-publication costs
(Increase)/decrease in receivables
Decrease in payables
Increase in working capital
Cash generated from operations
CASH FLOW ON ACQUISITIONS
Purchase of businesses
Investment in joint ventures
Deferred payments relating to prior year acquisitions
Total
RECONCILIATION OF NET BORROWINGS
2014
£m
2013
£m
1,366
1,347
282
158
79
32
551
3
(66)
(3)
(66)
1,851
2014
£m
(347)
(15)
(34)
(396)
317
160
89
31
597
10
5
(16)
(1)
1,943
2013
£m
(194)
(6)
(21)
(221)
Note
12
Cash and
cash
equivalents
£m
Borrowings
£m
Related
derivative
financial
instruments
£m
2014
£m
2013
£m
At start of year
132
(3,281)
77
(3,072)
(3,127)
Increase/(decrease) in cash and cash equivalents
Net movement in short-term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Change in net borrowings resulting from cash flows
Borrowings in acquired businesses
Inception of finance leases
Fair value and other adjustments to borrowings and related derivatives
Exchange translation differences
At end of year
142
–
–
–
–
142
–
–
–
2
276
–
(241)
(589)
300
10
(520)
(20)
(3)
78
(79)
(3,825)
–
9
–
–
–
9
–
–
(85)
(2)
(1)
142
(232)
(589)
300
10
(369)
(20)
(3)
(7)
(79)
(3,550)
(532)
(169)
(184)
915
10
40
–
(12)
(1)
28
(3,072)
Net borrowings comprise cash and cash equivalents, loan capital, finance leases, promissory notes, bank and other loans, derivative
financial instruments that are used to hedge certain borrowings, and adjustments in respect of cash collateral received/paid.
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116
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
12 Acquisitions
During the year a number of acquisitions were made for a total consideration of £356m (2013: £239m), after taking account of net cash
acquired of £9m (2013: £14m). The net assets of the businesses acquired are incorporated at their fair value to the combined businesses.
Provisional fair values of the consideration given and of the assets and liabilities acquired are summarised below:
Goodwill
Intangible assets
Property, plant and equipment
Current assets
Current liabilities
Borrowings
Deferred tax
Net assets acquired
Consideration (after taking account of £9m (2013: £14m) net cash acquired)
Less: consideration deferred to future years
Less: acquisition date fair value of equity interest
Net cash flow
Fair
value
2014
£m
240
187
3
21
(39)
(20)
(36)
356
356
(8)
(1)
347
Fair
value
2013
£m
157
133
–
9
(21)
–
(39)
239
239
(36)
(9)
194
Goodwill, being the excess of the consideration over the net tangible and intangible assets acquired, represents benefits which do not
qualify for recognition as intangible assets, including the ability of a business to generate higher returns than individual assets, skilled
workforces; and acquisition synergies that are specific to the Group. In addition, goodwill arises on the recognition of deferred tax
liabilities in respect of intangible assets for which amortisation does not qualify for tax deductions.
The fair values of the assets and liabilities acquired are provisional pending the completion of the valuation exercises. Final fair values
will be incorporated in the 2015 combined financial statements. There were no significant adjustments to the provisional fair values of
prior year acquisitions established in 2013.
The businesses acquired in 2014 contributed £37m to revenue, increased adjusted operating profit by £7m, increased adjusted net profit
by £3m, decreased net profit by £6m; and contributed a net cash inflow of £3m from operating activities for the part year under the
Group’s ownership and before taking account of acquisition financing costs. Had the businesses been acquired at the beginning of the
year, on a pro forma basis the Group revenues, adjusted operating profit, adjusted net profit attributable to parent companies’
shareholders and net profit attributable to parent companies’ shareholders for the year would have been £5,840m, £1,746m, £1,215m
and £957m respectively before taking account of acquisition financing costs.
13 Equity dividends
ORDINARY DIVIDENDS DECLARED AND PAID IN THE YEAR
Reed Elsevier PLC
Reed Elsevier NV
Total
2014
£m
285
281
566
2013
£m
278
273
551
Ordinary dividends declared and paid in the year, in amounts per ordinary share, comprise: a 2013 final dividend of 17.95p and a 2014
interim dividend of 7.00p giving a total of 24.95p (2013: 23.65p) for Reed Elsevier PLC; and a 2013 final dividend of €0.374 and a 2014
interim dividend of €0.151 giving a total of €0.525 (2013: €0.469) for Reed Elsevier NV.
The Directors of Reed Elsevier PLC have proposed a final dividend of 19.00p (2013: 17.95p). The Directors of Reed Elsevier NV have
proposed a final dividend of €0.438 (2013: €0.374). The total cost of funding the proposed final dividends is expected to be £445m, for
which no liability has been recognised at the statement of financial position date.
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RELX Group Annual Reports and Financial Statements 2014
117
13 Equity dividends continued
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Reed Elsevier PLC
Reed Elsevier NV
Total
2014
£m
294
312
606
2013
£m
283
288
571
Dividends paid to Reed Elsevier PLC and Reed Elsevier NV shareholders are, other than in special circumstances, equalised at the gross
level inclusive of the UK tax credit of 10% available to certain Reed Elsevier PLC shareholders.
14 Goodwill
At start of year
Acquisitions
Disposals/reclassified as held for sale
Exchange translation differences
At end of year
2014
£m
4,576
240
(34)
199
4,981
2013
£m
4,545
157
(46)
(80)
4,576
The carrying amount of goodwill is after cumulative amortisation of £1,106m (2013: £1,154m) which was charged prior to the adoption of
IFRS and £9m (2013: £9m) of subsequent impairment charges recorded in prior years.
Impairment review
Impairment testing of goodwill and indefinite lived intangible assets is performed at least annually in accordance with the methodology
described within critical judgements and key sources of estimation uncertainty on page 99. There were no charges for impairment of
goodwill in 2014 (2013: nil).
Goodwill is compiled and assessed among groups of cash generating units (CGUs), which represent the lowest level at which goodwill is
monitored by management. Typically, acquisitions are integrated into existing business units, and the goodwill arising is allocated to the
groups of CGUs that are expected to benefit from the synergies of the acquisition. As the business areas have become increasingly
integrated and globalised, management has reviewed the allocation of goodwill to groups of CGUs. In order to reflect the global leverage
of assets, skills, knowledge and technology platforms, and consequential changes to the monitoring of goodwill by management, the
number of groups of CGUs to which goodwill is allocated has been reduced from 25 in 2013 to 5 in 2014. Reducing the number of groups of
CGUs had no impact on the carrying values of goodwill, which are set out below:
GOODWILL
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Total
The key assumptions for each group of CGUs are disclosed below.
KEY ASSUMPTIONS
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
2014
£m
1,109
1,779
480
1,199
414
4,981
2013
£m
1,051
1,604
374
1,121
426
4,576
Nominal
long-term
market
growth rate
3.0%
3.0%
3.0%
2.0%
3.0%
Pre-tax
discount rate
10.4%
11.5%
11.7%
11.5%
11.7%
The pre-tax discount rates used are based on the Group’s weighted average cost of capital, adjusted to reflect a risk premium specific to
each business. Nominal long-term market growth rates, which are applied after the forecast period of up to five years, do not exceed the
long-term average growth prospects for the sectors and territories in which the businesses operate.
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118
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
14 Goodwill continued
A sensitivity analysis has been performed based on changes in key assumptions considered to be reasonably possible by management:
an increase in the discount rate of 0.5%; a decrease in the compound annual growth rate for adjusted cash flow in the five-year forecast
period of 2.0%; and a decrease in the nominal long-term market growth rates of 0.5%. The sensitivity analysis shows that no impairment
charges would result from these scenarios.
15 Intangible assets
Cost
At 1 January 2013
Acquisitions
Additions
Disposals/reclassified as held for sale
Exchange translation differences
At 1 January 2014
Acquisitions
Additions
Disposals/reclassified as held for sale
Exchange translation differences
At 31 December 2014
Accumulated amortisation
At 1 January 2013
Charge for the year
Disposals/reclassified as held for sale
Exchange translation differences
At 1 January 2014
Charge for the year
Disposals/reclassified as held for sale
Exchange translation differences
At 31 December 2014
Net book amount
At 31 December 2013
At 31 December 2014
Market and
customer
related
£m
Content,
software
and other
£m
Total
acquired
intangible
assets
£m
Internally
developed
intangible
assets
£m
2,816
49
–
(55)
(65)
2,745
69
–
–
151
2,965
870
178
(55)
(26)
967
154
–
58
1,179
3,090
84
–
(216)
(16)
2,942
117
–
(62)
44
3,041
2,408
139
(216)
(15)
2,316
128
(44)
43
2,443
5,906
133
–
(271)
(81)
5,687
186
–
(62)
195
6,006
3,278
317
(271)
(41)
3,283
282
(44)
101
3,622
1,517
–
251
(27)
(24)
1,717
1
207
(73)
32
1,884
870
160
(22)
(11)
997
158
(64)
13
1,104
Total
£m
7,423
133
251
(298)
(105)
7,404
187
207
(135)
227
7,890
4,148
477
(293)
(52)
4,280
440
(108)
114
4,726
1,778
1,786
626
598
2,404
2,384
720
780
3,124
3,164
Intangible assets acquired as part of business combinations comprise: market-related assets (e.g. trademarks, imprints, brands);
customer-related assets (e.g. subscription bases, customer lists, customer relationships); and content, software and other intangible
assets (e.g. editorial content, software and product delivery systems, other publishing rights, exhibition rights and supply contracts).
Included in content, software and other acquired intangible assets are assets with a net book value of £265m (2013: £353m) that arose on
acquisitions completed prior to the adoption of IFRS that have not been allocated to specific categories of intangible assets. Internally
developed intangible assets typically comprise software and systems development where an identifiable asset is created that is
expected to generate future economic benefits.
Included in market and customer-related intangible assets are £369m (2013: £347m) of brands and imprints relating to Scientific,
Technical & Medical determined to have indefinite lives based on an assessment of their historical longevity and stable market positions.
Indefinite lived intangibles are tested for impairment at least annually using the same value in use assumptions as set out in critical
judgements and key sources of estimation uncertainty on pages 99 and 100.
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RELX Group Annual Reports and Financial Statements 2014
119
16 Investments
Investments in joint ventures
Available for sale investments
Venture capital investments held for trading
Total
2014
£m
125
2
110
237
The value of venture capital investments held for trading, determined by reference to quoted market prices, amounted to nil
(2013: £12m). The value of other venture capital investments and available for sale investments has been determined by reference
to other observable market inputs. Gains and losses included in the combined income statement are provided in note 8.
An analysis of changes in the carrying value of investments in joint ventures is set out below:
At start of year
Share of results of joint ventures
Dividends received from joint ventures
Disposals and transfers
Additions
Exchange translation differences
At end of year
2014
£m
125
36
(44)
(1)
15
(6)
125
2013
£m
125
2
90
217
2013
£m
100
29
(22)
(3)
21
–
125
The principal joint ventures at 31 December 2014 are exhibition joint ventures within Exhibitions and Giuffrè and Martindale within Legal.
Summarised aggregate information in respect of joint ventures and the Group’s share is set out below:
Revenue
Net profit for the year
Total assets
Total liabilities
Net assets
Goodwill
Total
Total joint ventures
Reed Elsevier share
2014
£m
284
69
285
(181)
104
2013
£m
225
57
246
(134)
112
2014
£m
153
36
138
(91)
47
78
125
2013
£m
110
29
117
(64)
53
72
125
The Group’s combined other comprehensive income includes nil (2013: nil) relating to joint ventures.
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120
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
17 Property, plant and equipment
Cost
At start of year
Acquisitions
Capital expenditure
Disposals/reclassified as held for sale
Exchange translation differences
At end of year
Accumulated depreciation
At start of year
Disposals/reclassified as held for sale
Charge for the year
Exchange translation differences
At end of year
2014
Land and
buildings
£m
Fixtures and
equipment
£m
210
–
9
(25)
7
201
117
(16)
9
4
114
558
3
61
(40)
18
600
414
(38)
70
14
460
2013
Land and
buildings
£m
Fixtures and
equipment
£m
218
–
4
(8)
(4)
210
116
(6)
9
(2)
117
537
–
66
(34)
(11)
558
375
(32)
80
(9)
414
Total
£m
768
3
70
(65)
25
801
531
(54)
79
18
574
Total
£m
755
–
70
(42)
(15)
768
491
(38)
89
(11)
531
Net book amount
87
140
227
93
144
237
No depreciation is provided on freehold land of £14m (2013: £14m). The net book amount of property, plant and equipment at 31 December
2014 includes £13m (2013: £17m) in respect of assets held under finance leases relating to fixtures and equipment.
18 Financial instruments
The main financial risks faced by the Group are liquidity risk, market risk – comprising interest rate risk and foreign exchange risk – and
credit risk. Financial instruments are used to finance the Group businesses and to hedge interest rate and foreign exchange risks. The
Group’s businesses do not enter into speculative derivative transactions. Details of financial instruments subject to liquidity, market and
credit risks are described below.
Liquidity risk
The Group maintains a range of borrowing facilities and debt programmes to fund its requirements, at short notice and at competitive rates.
The balance of long-term debt, short-term debt and committed bank facilities is managed to provide security of funding, taking into
account the cash generation cycle of the business and the uncertain size and timing of acquisition spend. To accommodate the significant
free cash flow generated by the Group and to capitalise on an inexpensive source of funding, a meaningful portion of the overall debt
portfolio is typically kept short term as long as there exists acceptable liquidity in the commercial paper markets and sufficient capacity
under committed credit lines. The treasury policies ensure adequate liquidity by requiring (a) that no more than $1.5bn of term debt
matures in any 12-month period, (b) that the sum of term debt maturing over the ensuing 12 months plus commercial paper is less
than the sum of available cash plus committed facilities and (c) minimum levels of borrowing with maturities over three and five years
are maintained.
The treasury policies ensure debt efficiency by (a) targeting certain levels of commercial paper across a given year, (b) maintaining a
weighted average maturity of the gross debt portfolio of approximately 5 years and (c) minimising surplus cash balances. From time to
time, based on cash flow and market conditions, the Group may redeem term debt early or repurchase outstanding debt in the open
market. Debt is issued to meet the funding requirements of various jurisdictions and in the currency that is needed. It is recognised that
debt can act as a natural translation hedge of earnings and net assets in currencies other than the reporting currencies. For this reason,
a significant proportion of the Group’s net debt has historically been denominated in US dollars, reflecting the size and importance of the
US businesses.
There were no changes to the Group’s long-term approach to capital and liquidity management during the year.
The remaining contractual maturities for borrowings and derivative financial instruments are shown in the table below. The table shows
undiscounted principal and interest cash flows and includes contractual gross cash flows to be exchanged as part of cross currency
interest rate swaps and forward foreign exchange contracts where there is a legal right of set-off.
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121
18 Financial instruments continued
At 31 December 2014
Borrowings
Fixed rate borrowings
Floating rate borrowings
Derivative financial liabilities
Interest rate derivatives
Cross-currency interest rate swaps
Forward foreign exchange contracts
Derivative financial assets
Interest rate derivatives
Cross-currency interest rate swaps
Forward foreign exchange contracts
Total
At 31 December 2013
Borrowings
Fixed rate borrowings
Floating rate borrowings
Derivative financial liabilities
Interest rate derivatives
Cross-currency interest rate swaps
Forward foreign exchange contracts
Derivative financial assets
Interest rate derivatives
Cross-currency interest rate swaps
Forward foreign exchange contracts
Total
Carrying
amount
£m
(2,937)
(888)
Within
1 year
£m
(263)
(551)
–
(47)
(47)
–
(11)
(1,288)
46
6
57
(3,810)
14
3
1,293
(803)
Carrying
amount
£m
(2,931)
(350)
Within
1 year
£m
(497)
(288)
(4)
(6)
(7)
–
(180)
(1,031)
19
70
99
(3,110)
13
247
1,082
(654)
Contractual cash flow
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
Total
£m
(536)
(3)
(432)
(275)
(265)
(65)
(632)
–
(1,631)
(2)
(3,759)
(896)
–
(10)
(474)
13
3
475
(532)
–
(318)
(150)
11
275
150
(739)
–
(188)
(58)
4
181
62
(329)
–
–
–
–
–
–
–
(527)
(1,970)
4
–
–
(628)
5
–
–
(1,628)
51
462
1,980
(4,659)
Contractual cash flow
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
Total
£m
(243)
(61)
–
(3)
(402)
11
2
431
(265)
(524)
–
(420)
(1)
(264)
–
(1,909)
(2)
(3,857)
(352)
–
(5)
(222)
6
2
233
(510)
(1)
(7)
–
1
3
–
(425)
(4)
(193)
–
–
189
–
(272)
(7)
–
–
(12)
(388)
(1,655)
–
–
–
(1,918)
31
443
1,746
(4,044)
The carrying amount of derivative financial liabilities comprises £3m (2013: £10m) in relation to fair value hedges, £78m (2013: £7m) in
relation to cash flow hedges and £9m (2013: nil) not designated as hedging instruments, plus £4m of cash collateral received from swap
counterparties which has been added to the related derivative financial liabilities (2013: £13m which has been offset against the related
derivative financial assets) (see ‘Credit risk’ below). The carrying amount of derivative financial assets comprises £46m (2013: £84m)
in relation to fair value hedges, £60m (2013: £88m) in relation to cash flow hedges and £3m (2013: £29m) not designated as hedging
instruments. The expected cash flows in respect of the cash collateral have been included in the tables above together with the cash
flows for the related cross-currency interest rate swaps.
At 31 December 2014, the Group had access to a $2,000m committed bank facility maturing in July 2019, which was undrawn. This facility
backs up short-term borrowings. All borrowings that mature within the next two years can be covered by the facility and by utilising
available cash resources.
The committed bank facility, together with certain private placements, are subject to financial covenants typical to the Group’s size and
financial strength. The Group had significant headroom within these covenants for the year ended 31 December 2014. There are no
financial covenants in any outstanding public bonds.
Market risk
The Group’s primary market risks are to interest rate fluctuations and exchange rate movements. Derivatives are used to hedge or
reduce the risks of interest rate and exchange rate movements and are not entered into unless such risks exist. Derivatives used by the
Group for hedging a particular risk are not specialised and are generally available from numerous sources. The impact of market risks
on net post employment benefit obligations and taxation is excluded from the following market risk sensitivity analysis.
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122
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
18 Financial instruments continued
Interest rate exposure management
The Group’s interest rate exposure management policy aims to reduce the exposure of the combined businesses to changes in interest
rates at efficient cost. To achieve this the Group uses fixed rate term debt, interest rate swaps, forward rate agreements and interest
rate options. Interest rate derivatives are used only to hedge an underlying risk and no net market positions are held.
At 31 December 2014, 52% of gross borrowings were either fixed rate or had been fixed through the use of interest rate swaps, forward
rate agreements and options. A 100 basis point reduction in interest rates would result in an estimated decrease in net finance costs of
£16m (2013: £12m), based on the composition of financial instruments including cash, cash equivalents, bank loans and commercial
paper borrowings at 31 December 2014. A 100 basis point rise in interest rates would result in an estimated increase in net finance costs
of £16m (2013: £12m).
The impact on net equity of a theoretical change in interest rates as at 31 December 2014 is restricted to the change in carrying value of
floating rate to fixed rate interest rate derivatives in a designated cash flow hedge relationship and undesignated interest rate
derivatives, of which there were none in the Group as at 31 December 2014. A 100 basis point reduction in interest rates would therefore
result in a reduction in net equity of nil (2013: nil) and a 100 basis point increase in interest rates would increase net equity by nil (2013:
£1m). The impact of a change in interest rates on the carrying value of fixed rate borrowings in a designated fair value hedge relationship
would be offset by the change in carrying value of the related interest rate derivative. Fixed rate borrowings not in a designated hedging
relationship are carried at amortised cost.
Foreign currency exposure management
Translation exposures arise on the earnings and net assets of business operations in countries other than those of each parent company.
Some of these exposures are offset by denominating borrowings in US dollars. Currency exposures on transactions denominated in a
foreign currency are generally hedged using forward contracts. In addition, recurring transactions and future investment exposures
may be hedged, in advance of becoming contractual. The precise policy differs according to the specific circumstances of the individual
businesses. Highly predictable future cash flows may be covered for transactions expected to occur during the next 24 months
(50 months for the Scientific, Technical & Medical subscription businesses) within limits defined according to the period before the
transaction is expected to become contractual. Cover takes the form of foreign exchange forward contracts.
As at 31 December 2014, the amount of outstanding foreign exchange cover against future transactions was £1.4bn (2013: £1.3bn).
A theoretical weakening of all currencies by 10% against sterling at 31 December 2014 would decrease the carrying value of net assets,
excluding net borrowings, by £524m (2013: £500m). This would be offset to a degree by a decrease in net borrowings of £255m (2013:
£246m). A strengthening of all currencies by 10% against sterling at 31 December 2014 would increase the carrying value of net assets,
excluding net borrowings, by £524m (2013: £500m) and increase net borrowings by £255m (2013: £246m).
A retranslation of the combined businesses’ net profit for the year assuming a 10% weakening of all foreign currencies against sterling
but excluding transactional exposures would reduce net profit by £80m (2013: £92m). A 10% strengthening of all foreign currencies
against sterling on this basis would increase net profit for the year by £80m (2013: £92m).
Credit risk
The Group seeks to limit interest rate and foreign exchange risks described above by the use of financial instruments and as a result has
a credit risk from the potential non-performance by the counterparties to these financial instruments, which are unsecured.
The amount of this credit risk is normally restricted to the amounts of any hedge gain and not the principal amount being hedged. The
Group also has a credit exposure to counterparties for the full principal amount of cash and cash equivalents. Credit risks are controlled
by monitoring the credit quality of these counterparties, principally licensed commercial banks and investment banks with strong
long-term credit ratings, and the amounts outstanding with each of them.
In certain situations, the Group enters into credit support arrangements with derivative counterparties to mitigate the credit exposures
arising from hedge gains on the related financial instruments. Under these arrangements, the Group receives (or pays) cash collateral
equal to the mark to market valuation of the related derivative asset (or liability) on monthly settlement dates. At 31 December 2014,
£4m (2013: £13m) of cash collateral had been received, and the resulting payable balance was added to the related derivative liabilities
of £1m (2013: £13m offset against the related derivative assets of £12m) in the statement of financial position.
The Group has treasury policies in place which do not allow concentrations of risk with individual counterparties and do not allow significant
treasury exposures with counterparties which are rated lower than A-/A3 by Standard & Poor’s, Moody’s and Fitch. At 31 December 2014,
cash and cash equivalents totalled £276m (2013: £132m), of which 96% (2013: 90%) was held with banks rated A-/A3 or better.
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123
18 Financial instruments continued
The Group also has credit risk with respect to trade receivables due from its customers that include national and state governments,
academic institutions and large and small enterprises including law firms, book stores and wholesalers. The concentration of credit
risk from trade receivables is limited due to the large and broad customer base. Trade receivable exposures are managed locally in the
business units where they arise. Where appropriate, business units seek to minimise this exposure by taking payment in advance and
through management of credit terms. Allowance is made for bad and doubtful debts based on management’s assessment of the risk
taking into account the ageing profile, experience and circumstance. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset, including derivative financial instruments, recorded in the statement of financial position.
Included within trade receivables are the following amounts which are past due but for which no allowance has been made. Past due up
to one month £136m (2013: £156m); past due two to three months £66m (2013: £76m); past due four to six months £30m (2013: £26m); and
past due greater than six months £7m (2013: £7m). Examples of trade receivables which are past due but for which no allowance has
been made include those receivables where there is no concern over the creditworthiness of the customer and where the history of
dealings with the customer indicate the amount will be settled.
Hedge accounting
The hedging relationships that are designated under IAS39 – Financial Instruments are described below:
Fair value hedges
The Group has entered into interest rate swaps and cross-currency interest rate swaps to hedge the exposure to changes in the fair
value of fixed rate borrowings due to interest rate and foreign currency movements which could affect the income statement. Interest
rate derivatives (including cross-currency interest rate swaps) with a principal amount of £908m were in place at 31 December 2014
swapping fixed rate term debt issues denominated in US dollars (USD), sterling and euros to floating rate USD, sterling and euro debt
respectively for the whole or part of their term (2013: £1,104m swapping fixed rate term debt issues denominated in USD, sterling, euros
and Swiss francs (CHF) to floating rate USD, sterling, euro and USD debt respectively for the whole or part of their term).
The gains and losses on the borrowings and related derivatives designated as fair value hedges, which are included in the income
statement, for the two years ended 31 December 2014 were as follows:
GAINS/(LOSSES) ON BORROWINGS
AND RELATED DERIVATIVES
USD debt
Related interest rate swaps
GBP debt
Related interest rate swaps
EUR debt
Related interest rate swaps
CHF debt
Related CHF to USD cross-currency interest
rate swaps
Total relating to USD, GBP, EUR and CHF debt
Total related interest rate derivatives
Net gain
1 January
2013
£m
–
–
–
Fair value
movement
gain/(loss)
£m
6
(6)
–
Exchange
gain/(loss)
£m
–
–
–
1 January
2014
£m
6
(6)
–
(36)
36
–
(8)
8
–
(80)
80
–
(124)
124
–
17
(17)
–
13
(13)
–
14
(14)
–
50
(50)
–
–
–
–
(1)
1
–
1
(1)
–
–
–
–
(19)
19
–
4
(4)
–
(65)
65
–
(74)
74
–
Fair value
movement
gain/(loss)
£m
Exchange
gain/(loss)
£m
31 December
2014
£m
(3)
3
–
(1)
1
–
(31)
31
–
65
(65)
–
30
(30)
–
–
–
–
–
–
–
1
(1)
–
–
–
–
1
(1)
–
3
(3)
–
(20)
20
–
(26)
26
–
–
–
–
(43)
43
–
All fair value hedges were highly effective throughout the two years ended 31 December 2014.
Gross borrowings as at 31 December 2014 included £29m (2013: £31m) in relation to fair value adjustments to borrowings previously
designated in a fair value hedge relationship which were de-designated in 2008. The related derivatives were closed out on
de-designation with a cash inflow of £62m. £4m (2013: £5m) of these fair value adjustments were amortised in the year as a reduction
to finance costs.
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124
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
18 Financial instruments continued
Cash flow hedges
The Group enters into two types of cash flow hedge:
1
2
Debt hedges comprising interest rate derivatives which fix the interest expense on a portion of forecast floating rate debt (including
commercial paper, short-term bank loans and floating rate term debt), and cross-currency interest rate derivatives which hedge
the cash flow exposure arising from foreign currency denominated debt.
Revenue hedges comprising forward foreign exchange contracts which fix the exchange rate on a portion of future foreign currency
subscription revenues forecast by the Scientific, Technical & Medical businesses for up to 50 months.
Movements in the hedge reserve in 2013 and 2014, including gains and losses on cash flow hedging instruments, were as follows:
Hedge reserve at 1 January 2013: (losses)/gains deferred
Gains arising in 2013
Amounts recognised in income statement
Exchange translation differences
Hedge reserve at 1 January 2014: gains deferred
Losses arising in 2014
Amounts recognised in income statement
Exchange translation differences
Hedge reserve at 31 December 2014: gains deferred
Debt
hedges
£m
Revenue
hedges
£m
Total hedge
reserve
pre-tax
£m
(2)
1
3
–
2
(52)
56
–
6
37
64
(6)
(1)
94
(29)
(37)
1
29
35
65
(3)
(1)
96
(81)
19
1
35
All cash flow hedges were highly effective throughout the two years ended 31 December 2014.
A tax charge of £10m (2013: £23m) in respect of the above gains and losses at 31 December 2014 was also deferred in the hedge reserve.
Of the amounts recognised in the income statement in the year, gains of £37m (2013: £6m) were recognised in revenue, and losses of
£56m (2013: £3m) were recognised in finance costs. A tax charge of £9m (2013: £1m) was recognised in relation to these items.
The deferred gains and losses on cash flow hedges at 31 December 2014 are currently expected to be recognised in the income
statement in future years as follows:
2015
2016
2017
2018
2019
Gains deferred in hedge reserve at end of year
Debt
hedges
£m
(1)
–
2
5
–
6
Revenue
hedges
£m
24
6
(2)
1
–
29
Total hedge
reserve
pre-tax
£m
23
6
–
6
–
35
The cash flows for these hedges are expected to occur in line with the recognition of the gains and losses in the income statement, other
than in respect of certain forward foreign exchange hedges on subscriptions, where cash flows may occur in advance of the
subscription year.
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RELX Group Annual Reports and Financial Statements 2014
125
19 Deferred tax
Deferred tax assets
Deferred tax liabilities
Total
2014
£m
464
(1,056)
(592)
2013
£m
442
(1,076)
(634)
Movements in deferred tax liabilities and assets (before taking into consideration the offsetting of balances within the same jurisdiction)
are summarised as follows:
Deferred tax liabilities
Deferred tax assets
Excess of tax
allowances
over
amortisation
£m
Acquired
intangible
assets
£m
Other
temporary
differences
£m
Excess of
amortisation
over tax
allowances
£m
Tax losses
carried
forward
£m
Pensions
liabilities
£m
Other
temporary
differences
£m
Deferred tax (liability)/asset at
1 January 2013
(Charge)/credit to profit
(Charge)/credit to equity/other
comprehensive income
Acquisitions
Disposals/reclassified as held for sale
Exchange translation differences
Deferred tax (liability)/asset at
1 January 2014
Credit/(charge) to profit
(Charge)/credit to equity/other
comprehensive income
Acquisitions
Exchange translation differences
Deferred tax (liability)/asset at
31 December 2014
(223)
(138)
–
–
(3)
13
(351)
11
–
–
(21)
(772)
98
–
(39)
(18)
13
(718)
71
–
(53)
(34)
(108)
(106)
(6)
–
(9)
4
(225)
(18)
(8)
–
10
9
346
–
–
–
(6)
349
(4)
–
–
(22)
(361)
(734)
(241)
323
23
(8)
–
–
–
(1)
14
5
–
17
–
36
Total
£m
(840)
271
(18)
(39)
(30)
22
(634)
88
70
(36)
(80)
153
(26)
(24)
–
–
1
104
(6)
63
–
–
78
105
12
–
–
(2)
193
29
15
–
(13)
161
224
(592)
Other deferred tax liabilities includes temporary differences in respect of plant, property and equipment, capitalised development
spend and financial instruments. Other deferred tax assets includes temporary differences in respect of share based remuneration,
provisions and financial instruments.
Deferred tax assets in respect of tax losses and other deductible temporary differences have only been recognised to the extent that it is
more likely than not that sufficient taxable profits will be available to allow the asset to be recovered. Accordingly, no deferred tax asset
has been recognised in respect of unused trading losses of approximately £80m (2013: £84m) carried forward at year end. The deferred
tax asset not recognised in respect of these losses is approximately £19m (2013: £20m). Of the unrecognised losses, £49m (2013: £56m)
will expire if not utilised within 10 years, and £31m (2013: £28m) will expire after more than 10 years.
Deferred tax assets of approximately £13m (2013: £14m) have not been recognised in respect of tax losses and other temporary
differences carried forward of £65m (2013: £69m) which can only be used to offset future capital gains.
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126
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
20 Inventories and pre-publication costs
Raw materials
Pre-publication costs
Finished goods
Total
21 Trade and other receivables
Trade receivables
Allowance for doubtful debts
Prepayments and accrued income
Total
2014
£m
2
92
48
142
2013
£m
3
90
49
142
2014
£m
1,361
(50)
1,311
176
1,487
2013
£m
1,299
(57)
1,242
174
1,416
Trade receivables are predominantly non-interest bearing and their carrying amounts approximate to their fair value.
Trade receivables are stated net of allowances for bad and doubtful debts. The movements in the provision during the year were as
follows:
At start of year
Charge for the year
Trade receivables written off
Exchange translation differences
At end of year
22 Trade and other payables
Trade payables
Accruals
Social security and other taxes
Other payables
Deferred income
Total
2014
£m
57
8
(14)
(1)
50
2014
£m
333
462
88
300
1,453
2,636
2013
£m
51
17
(11)
–
57
2013
£m
330
443
88
331
1,403
2,595
Trade and other payables are predominately non-interest bearing and their carrying amounts approximate to their fair value.
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127
23 Borrowings
Financial liabilities measured at amortised cost:
Short-term bank loans, overdrafts and commercial paper
Term debt
Finance leases
Term debt in fair value hedging relationships
Term debt previously in fair value hedging relationships
Total
2014
Falling due
within
1 year
£m
Falling due in
more than
1 year
£m
548
–
7
–
121
676
–
1,823
5
951
370
3,149
2013
Falling due
within
1 year
£m
Falling due in
more than
1 year
£m
287
–
9
240
112
648
–
1,223
8
938
464
2,633
Total
£m
548
1,823
12
951
491
3,825
Total
£m
287
1,223
17
1,178
576
3,281
The total fair value of financial liabilities measured at amortised cost is £2,597m (2013: £1,709m). The total fair value of term debt in fair
value hedging relationships is £1,045m (2013: £1,288m). The total fair value of term debt previously in fair value hedging relationships is
£588m (2013: £650m).
In 2013, £186m principal amount of term debt maturing in 2019 was exchanged for £235m principal amount of term debt maturing in
2022 and cash. The exchange is treated as a debt modification for accounting purposes. The premium arising is offset against the
carrying amount of the newly issued term debt maturing in 2022 and will be amortised over its life.
Analysis by year of repayment
2014
2013
Short-term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
548
–
–
–
–
–
–
548
121
400
615
242
553
1,334
3,144
3,265
7
4
1
–
–
–
5
12
Short-term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
287
–
–
–
–
–
–
287
352
174
400
341
181
1,529
2,625
2,977
9
5
3
–
–
–
8
17
Total
£m
676
404
616
242
553
1,334
3,149
3,825
Total
£m
648
179
403
341
181
1,529
2,633
3,281
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
After 1 year
Total
Short-term bank loans, overdrafts and commercial paper were backed up at 31 December 2014 by a $2,000m (£1,284m) committed bank
facility maturing in July 2019, which was undrawn.
Analysis by currency
US dollars
£ sterling
Euro
Other currencies
Total
2014
2013
Short-term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
254
69
224
1
548
1,788
1,020
457
–
3,265
12
–
–
–
12
Short-term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
87
27
167
6
287
1,800
719
458
–
2,977
17
–
–
–
17
Total
£m
2,054
1,089
681
1
3,825
Total
£m
1,904
746
625
6
3,281
Included in the US dollar amounts for term debt above is £449m (2013: £427m) of debt denominated in euros (€350m; 2013: nil) and
Swiss francs (CHF 275m; 2013: CHF 625m) that was swapped into US dollars on issuance and against which there are related derivative
financial instruments, which, as at 31 December 2014, had a fair value of £40m (2013: £81m).
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128
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
24 Lease arrangements
Finance leases
At 31 December 2014 future finance lease obligations fall due as follows:
Within one year
In the second to fifth years inclusive
Less future finance charges
Total
Present value of future finance lease obligations payable:
Within one year
In the second to fifth years inclusive
Total
The fair value of the lease obligations approximates to their carrying amount.
2014
£m
2013
£m
7
5
12
–
12
7
5
12
9
8
17
–
17
9
8
17
Operating leases
The Group leases various properties, principally offices and warehouses, which have varying terms and renewal rights that are typical
to the territory in which they are located.
At 31 December 2014 outstanding commitments under non–cancellable operating leases fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
Total
2014
£m
96
279
148
523
2013
£m
103
275
169
547
Of the above outstanding commitments, £509m (2013: £528m) relate to land and buildings.
The Group has a number of properties that are sub-leased. The future lease receivables contracted with sub-tenants fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
Total
2014
£m
15
46
21
82
2013
£m
16
43
25
84
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129
25 Provisions
At start of year
Charged
Utilised
Exchange translation differences
Total
2014
£m
133
–
(16)
6
123
2013
£m
169
–
(35)
(1)
133
Provisions principally relate to leasehold properties, including sub-lease shortfalls and guarantees given in respect of certain property
leases for various periods up to 2024.
At 31 December 2014, provisions are included within current and non-current liabilities as follows:
Current liabilities
Non-current liabilities
Total
2014
£m
19
104
123
2013
£m
17
116
133
26 Combined share capitals, share premiums and shares held in treasury
Combined share capitals exclude the shares of Reed Elsevier NV held by a subsidiary of Reed Elsevier PLC. Disclosures in respect of
share capital are given in note 11 to the Reed Elsevier PLC consolidated financial statements and note 12 to the Reed Elsevier NV
consolidated financial statements. Combined share premiums exclude the share premium in respect of shares of Reed Elsevier NV held
by a subsidiary of Reed Elsevier PLC.
During the year, Reed Elsevier PLC repurchased 35.2m Reed Elsevier PLC ordinary shares and Reed Elsevier NV repurchased 20.4m
Reed Elsevier NV ordinary shares for consideration of £600m. These shares are held in treasury. In addition, Reed Elsevier NV
repurchased 107,901 R shares. During the year 65m Reed Elsevier PLC and 40m Reed Elsevier NV shares held in treasury were cancelled.
The Employee Benefit Trust (EBT) purchases Reed Elsevier PLC and Reed Elsevier NV shares which, at the trustees’ discretion, can be
used in respect of the exercise of share options and to meet commitments under conditional share awards. During the year, the EBT
purchased 0.8m Reed Elsevier PLC shares and 2.0m Reed Elsevier NV shares for a total cost of £39m (2013: nil). At 31 December 2014,
shares held by the EBT were £117m (2013: £112m) at cost.
Details of the shares held in treasury are provided in note 11 of the Reed Elsevier PLC consolidated financial statements and note 12 of
the Reed Elsevier NV consolidated financial statements.
27 Other combined reserves
At start of year
Profit attributable to parent companies’ shareholders
Dividends paid
Actuarial (losses)/gains on defined benefit pension schemes
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Cancellation of shares
Settlement of share awards
Acquisition of non-controlling interest
Exchange translation differences
At end of year
Hedge
reserve
2014
£m
Other
reserves
2014
£m
73
–
–
–
(81)
19
13
–
–
–
–
1
25
807
955
(565)
(266)
–
–
63
48
(919)
(27)
(13)
(1)
82
Total
2014
£m
880
955
(565)
(266)
(81)
19
76
48
(919)
(27)
(13)
–
107
Total
2013
£m
252
1,110
(549)
40
65
(3)
(38)
48
–
(40)
–
(5)
880
Other reserves principally comprise retained earnings and the share based remuneration reserve.
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130
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2014
28 Related party transactions
Transactions between the combined businesses have been eliminated within the combined financial statements. Transactions with joint
ventures were made on normal market terms of trading and comprise sales of goods and services of nil (2013: £1m). As at 31 December
2014, amounts owed by joint ventures were £1m (2013: £7m) and amounts due to joint ventures were £6m (2013: £6m). Key management
personnel are also related parties as defined by IAS24 – Related Party Disclosures and comprise the Executive and Non-Executive
Directors of Reed Elsevier PLC and Reed Elsevier NV.
Key management personnel remuneration is set out below. The remuneration details of Executive Directors employed during 2014
are given in the Directors’ Remuneration Report single total remuneration table on page 76, with these details forming an integral part
of the financial statements. For reporting purposes, salary, benefits and annual incentive payments are considered short-term
employee benefits.
KEY MANAGEMENT PERSONNEL REMUNERATION
Salaries, other short-term employee benefits and non-executive fees
Post employment benefits
Share based remuneration*
Total
2014
£m
5
1
5
11
EXECUTIVE DIRECTORS
Total Executive Directors
Salary
£’000
1,763
1,677
Benefits
£’000
236
260
2014
2013
Annual
Incentive
£’000
1,855
1,743
Cost of
share based
remuneration*
£’000
5,284
3,898
Cost of
pension
provision*
£’000
711
642
2013
£m
4
1
4
9
Total
£’000
9,849
8,220
*The share based remuneration charge comprises the multi-year incentive scheme charges in accordance with IFRS2 – Share Based
Payment. These IFRS2 charges do not reflect the actual value received on vesting. The cost of pension provision comprises the transfer
value of the increase in accrued pension during the year (net of inflation, Directors’ contributions and participation fee) for defined
benefit schemes and payments made to defined contribution schemes or in lieu of pension.
NON-EXECUTIVE DIRECTORS
Fees and benefits
2014
£’000
1,143
2013
£’000
1,088
The remuneration details of Non-Executive Directors are set out in the Remuneration Report on page 79, with these details forming an
integral part of the financial statements. Termination benefits of £238,023 were paid to Directors during 2014 (2013:nil), further details
are shown on page 76. No loans, advances or guarantees have been provided on behalf of any Director. The aggregate gains made by
Executive Directors on the exercise of options during 2014 were £1,101,114 (2013: £2,526,305). Details of Directors’ remuneration are set
out in the Directors’ Remuneration Report on pages 75 to 88.
29 Exchange rates
The following exchange rates have been applied in preparing the combined financial statements:
Euro to sterling
US dollars to sterling
Income statement
Statement of
financial position
2014
1.24
1.65
2013
1.18
1.56
2014
1.29
1.56
2013
1.20
1.66
30 Approval of financial statements
The combined financial statements were approved and authorised for issue by the Boards of Directors of Reed Elsevier PLC and Reed
Elsevier NV on 25 February 2015.
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131
Independent auditors’ report
to the members of Reed Elsevier PLC and shareholders of Reed Elsevier NV
Opinion on our audit of the combined financial statements of
Reed Elsevier
In our opinion the combined financial statements:
§§ give a true and fair view of the state of affairs of Reed Elsevier PLC,
Reed Elsevier NV, RELX Group plc, Elsevier Reed Finance BV
and their subsidiaries, associates and joint ventures (together
“the combined businesses”) as at 31 December 2014 and of
their profit and their cash flows for the year then ended; and
§§ have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
We have audited the combined financial statements of the combined
businesses which comprise the combined income statement, the
combined statement of comprehensive income, the combined
statement of cash flows, the combined statement of financial
position, the combined statement of changes in equity, a summary of
the significant accounting policies and the related notes 1 to 30. The
financial reporting framework that has been applied in the preparation
is applicable law and IFRSs as adopted by the European Union.
We are independent of the combined businesses within the
meaning of the FRC’s Ethical Standards for Auditors and relevant
Dutch ethical requirements as included in “Verordening op de
gedrags- en beroepsregels accountants” (VGBA) and the
“Verordening inzake de onafhankelijkheid van accountants bij
assurance opdrachten”(ViO) and have fulfilled our other
responsibilities under those ethical requirements.
Key audit matters
Key audit matters are those that, in our professional judgment,
were of most significance in our audit of the combined financial
statements. They included the risks of material misstatement
which had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement
team. We have communicated these key audit matters to the Audit
Committees; the Audit Committees’ consideration of these risks is
set out on page 89. The key audit matters are not a comprehensive
reflection of all matters discussed.
Our audit procedures relating to these matters were addressed in
the context of our audit of the combined financial statements as a
whole and in forming our opinion thereon, and we do not provide a
separate opinion on these individual matters.
The accounting policies and critical judgements made in respect
of these matters are included on pages 96 – 101.
KEY AUDIT MATTER
HOW WE RESPONDED
The assessment of the carrying value of goodwill and acquired
intangible assets;
The combined businesses had £4,981 million of goodwill and
£2,384 million of acquired intangible assets as at 31 December
2014. The quantum of these balances together with the
judgements required to be made when performing an impairment
review have resulted in us considering this a significant risk.
The carrying value of internally developed intangible assets in
accordance with IAS 38 “Intangible Assets”;
The closing net book value of all capitalised development projects
is £780 million. The quantum of these balances, the significant
level of additions, and the judgements required to be made when
performing an impairment review have resulted in us considering
this a significant risk.
Revenue recognition, including the timing of revenue
recognition; and the accounting for multiple element
arrangements;
The Group’s businesses continue to evolve and new business
models can result in new revenue arrangements. This can result
in circumstances which require careful consideration to
determine how revenue should be recognised.
We have tested the operating effectiveness of management’s
internal controls in their review of the carrying values for goodwill
and acquired intangible assets including controls over the
valuation model and assumptions applied.
We challenged management on the level at which goodwill is
monitored and the identification of cash generating units. This
included checking consistency with how goodwill is allocated and
monitored by the businesses.
We challenged management’s assumptions used in the impairment
model with certain key assumptions outlined in Note 14 to the
combined financial statements. Specifically we challenged the cash
flow projections, discount rate, perpetuity growth rates and
sensitivities used, with assistance from our valuations experts where
appropriate, by looking at external market data and assessing the
historical accuracy of management’s forecasting.
We tested the operating effectiveness of relevant internal controls
related to the capitalisation of internally developed intangible
assets and their subsequent valuation, including the assessment
of useful economic lives.
We have tested the amounts capitalised in the period to ensure
the right to capitalise is in accordance with the requirements of
IFRS. We also challenged management’s assessment as to
whether development projects in-progress were still expected
to deliver sufficient positive economic benefits to the combined
businesses upon their completion, and for completed
development projects, considered whether the useful economic
lives selected remained appropriate.
We have tested revenue recognition in each of the full scope audit
locations including testing the associated internal controls.
We performed analytical reviews on revenues recognised to
identify any material new revenue streams and tested the timing
of recognition and accounting for multiple element arrangements
in accordance with IFRS. We also focused our audit procedures
on the nature of revenues, the degree of automation, unusual
contractual terms and the requirement for exercise of significant
management judgement. Our testing included agreeing amounts
to customer contracts and, verifying the extent, timing and
customer acceptance of delivery, where relevant.
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132 FINANCIAL STATEMENTS AND OTHER INFORMATION
INDEPENDENT AUDITORS’ REPORT
Independent auditors’ report
to the members of Reed Elsevier PLC and shareholders of Reed Elsevier NV
KEY AUDIT MATTER
HOW WE RESPONDED
The valuation of amounts recorded for uncertain tax positions
The Group operates in a significant number of jurisdictions
around the world, all with differing tax regimes with complex
cross-border arrangements, and is therefore open to challenge
from multiple tax authorities.
The valuation of defined benefit pension liabilities
The combined businesses’ operate defined benefit pension
schemes for existing and former employees in three main
jurisdictions. The liabilities for these schemes are valued using
data on scheme members and applying certain actuarial
assumptions. The gross pension liabilities total £4,977 million
(2013: £4,360 million) as set out in Note 5.
Our application of materiality
A misstatement arising from fraud or error will be considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on
the basis of these financial statements. The materiality affects the
nature, timing and extent of our audit procedures and the
evaluation of the effect of identified misstatements on our opinion.
We have considered a number of benchmarks in order to guide our
determination of our materiality. Based on our professional
judgement, we determined materiality for the combined
businesses to be £85 million, which is around 7% of pre-tax profit
and below 5% of equity. We have also taken into account
misstatements and/or possible misstatements that in our opinion
are material for the users of the financial statements for
qualitative reasons.
Our audit work at the operating locations was executed at levels
of materiality lower than the materiality for the combined
businesses and was capped at £30 million or $50 million.
We agreed with the Audit Committees that we would report to
them all audit misstatements in excess of £1.7 million, as well as
smaller misstatements that, in our view, must be reported on
qualitative grounds.
Our audit team was supported by tax experts in testing the
relevant uncertain tax positions, including assumptions and
estimates used, and tested the operating effectiveness of
management’s relevant controls.
We considered the appropriateness of management’s assumptions
and estimates in relation to uncertain tax positions, challenging
those assumptions and considering advice received by
management from external parties to support their analysis and
accounting for the uncertain tax position in accordance with IFRS.
We tested management’s controls over the valuation of pension
liabilities.
We engaged our actuarial specialists to assist in the auditing of
management’s assumptions used to value the pension liabilities.
For each of the three main jurisdictions we considered the
appropriateness of the assumptions both individually and when
combined with the other assumptions.
We performed testing on the member data used by management’s
actuaries to determine the valuation of the liabilities.
which were also subject to a full scope audit, account for 92% of
the combined businesses’ net assets, 93% of the combined
businesses’ liabilities, 79% of the combined businesses’ revenue,
89% of the combined businesses’ adjusted operating profit and
94% of the combined businesses’ profit before tax. They were also
selected to provide an appropriate basis for undertaking audit
work to address the risks of material misstatement identified
above. The combined businesses’ audit team continued to follow a
programme of planned visits that has been designed so that the
Audit Partners of Reed Elsevier PLC and Reed Elsevier NV visit the
key locations. The Audit Partners also attend audit close meetings
with management of each of the group’s four operating segments,
alongside the local auditors of the business units.
We also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant
risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit.
We obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities to
express an opinion on the combined financial statements. We are
responsible for the direction, supervision and performance of the
group audit. We remain responsible for our audit opinion.
An overview of the scope of our group audit
Our audit of the combined financial statements was scoped by
obtaining an understanding of the combined businesses and their
environment, including the entity-wide controls, and assessing
the risks of material misstatement at the combined businesses
level. Based on that risk assessment, we designed and performed
audit procedures responsive to those risks, and obtained audit
evidence that is sufficient and appropriate to provide a basis for
our opinion. In making those risk assessments, we considered
internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. As part of
an audit in accordance with the applicable standards, we
exercised professional judgment and maintain professional
scepticism throughout the planning and performance of the audit.
Based on that assessment, our audit scope for the combined
businesses focused primarily on the audits of seventeen operating
locations, which represent the principal business units within the
combined businesses’ four reportable segments. These locations,
together with the combined businesses’ head office functions,
Going concern
The combined financial statements have been prepared using the
going concern basis of accounting. In preparing the combined
financial statements, management is responsible for assessing
the combined businesses ability to continue as a going concern.
Based on the relevant financial reporting frameworks,
management should prepare the combined financial statements
using the going concern basis of accounting unless management
either intends to liquidate the combined businesses or to cease
operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that may
cast significant doubt on the combined businesses’ ability to
continue as a going concern.
We have reviewed the Report of the Boards on page 73 where the
Boards have not identified a material uncertainty that may cast
significant doubt on the combined businesses’ ability to continue
as a going concern. We confirm that:
§§ we have not identified material uncertainties related to events
or conditions that may cast significant doubt on the combined
businesses’ ability to continue as a going concern which we
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RELX Group Annual Reports and Financial Statements 2014
133
believe would need to be disclosed in accordance with IFRSs as
adopted by the European Union; and
§§ we have concluded that the Board’s use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the combined
businesses’ ability to continue as a going concern.
Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions
may cause the combined businesses to cease to continue as a
going concern.
Other matters
The separate audit reports on the consolidated and stand-alone
financial statements of Reed Elsevier PLC and Reed Elsevier NV,
which have been audited under locally adopted auditing standards
and which include the other opinions required by local laws and
regulations, appear on pages 162 and 183.
Responsibilities of directors
As explained more fully in the Directors’ responsibilities
statement, the Boards are responsible for the preparation and fair
presentation of the combined financial statements in accordance
with International Financial Reporting Standards as adopted by
the European Union and for being satisfied that they give a true and
fair view and for such internal control as they determine is
necessary to enable the preparation of combined financial
statements that are free from material misstatement, whether
due to fraud or error.
The Audit Committees assist the respective Boards in overseeing
the combined businesses’ financial reporting process.
Our Responsibility for the audit of the financial statements
Our responsibility is to audit and express an opinion on the
combined financial statements in accordance with International
Standards on Auditing (UK and Ireland) as issued by the United
Kingdom Auditing Practices Board and Dutch Law, including the
Dutch Standards on Auditing. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We are required to communicate with the Audit Committees
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We are also required to provide the Audit Committees with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable
related safeguards.
Scope of the audit of the combined financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the combined financial statements sufficient to give
reasonable assurance that the combined financial statements are
free from material misstatement, whether caused by fraud or
error. Reasonable assurance does not provide an absolute level of
assurance which means we may not have detected all errors and
fraud. An audit includes an assessment of: whether the accounting
policies are appropriate to the combined businesses’
circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the
combined financial. In addition, we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited combined financial statements
and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
We have exercised professional judgement and have maintained
professional scepticism throughout the audit, in accordance
with ISAs (UK and Ireland), Dutch Standards on Auditing,
ethical standards and relevant independence requirements.
Our audit included:
§§ identifying and assessing the risks of material misstatement of
the combined financial statements, whether due to fraud or
error, designing and performing audit procedures responsive
to those risks, and obtaining audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control;
§§ obtaining an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the combined businesses’
internal control;
§§ concluding on the appropriateness of management’s use of the
going concern basis of accounting, and based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the combined businesses’ ability to continue as a going
concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or
conditions may cause the combined businesses to cease to
continue as a going concern;
§§ evaluating the overall presentation, structure and content of
the financial statements, including the disclosures; and
§§ evaluating whether the combined financial statements
represent the underlying transactions and events in a manner
that achieves fair presentation.
Engagement
We were engaged by the Audit Committees as auditor of Reed
Elsevier PLC and as auditor of Reed Elsevier NV for the audit of
the financial year ended 31 December 2014 and have operated as
statutory auditor since 1994.
Graham Richardson (Senior statutory auditor) M.J. van der Vegte
For and on behalf of;
Deloitte LLP
Chartered Accountants
and Statutory Auditor
London, United Kingdom
25 February 2015
Deloitte Accountants B.V.
Amsterdam
The Netherlands
25 February 2015
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134 FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
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RELX Group Annual Reports and Financial Statements 2014
RELX Group Annual Reports and Financial Statements 2014
135
Summary
combined
financial
information
in euros
In this section
136 Combined income statement
136 Combined statement of
comprehensive income
137 Combined statement of cash flows
138 Combined statement of
financial position
139 Combined statement of
changes in equity
140 Notes to the summary combined
financial information in euros
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136 FINANCIAL STATEMENTS AND OTHER INFORMATION
SUMMARY COMBINED FINANCIAL STATEMENTS IN EUROS
Introduction
The combined financial statements are presented in pounds sterling. This summary financial information presents the primary combined
financial statements and selected notes in euros using the exchange rates provided in note 29 to the combined financial statements.
Combined income statement
Note
1
1
1
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration and other expenses
Operating profit before joint ventures
Share of results of joint ventures
Operating profit
Finance income
Finance costs
Net finance costs
Disposals and other non-operating items
Profit before tax
Current tax
Deferred tax
Tax expense
Net profit for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Net profit for the year
Combined statement of comprehensive income
Note
2
FOR THE YEAR ENDED 31 DECEMBER
Net profit for the year
Items that will not be reclassified to profit or loss:
Actuarial (losses)/gains on defined benefit pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified to profit or loss
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Total comprehensive income for the year
2014
€m
7,159
(2,488)
4,671
(1,158)
(1,819)
1,694
44
1,738
9
(210)
(201)
(14)
1,523
(443)
110
(333)
1,190
2013
€m
7,121
(2,499)
4,622
(1,186)
(1,847)
1,589
35
1,624
12
(243)
(231)
19
1,412
(416)
320
(96)
1,316
1,184
6
1,190
1,310
6
1,316
2014
€m
1,190
2013
€m
1,316
(330)
78
(252)
371
(100)
24
16
311
59
1,249
1,243
6
1,249
47
(28)
19
(171)
77
(3)
(17)
(114)
(95)
1,221
1,215
6
1,221
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RELX Group Annual Reports and Financial Statements 2014
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Tax paid (net)
Net cash from operating activities
Cash flows from investing activities
Acquisitions
Purchases of property, plant and equipment
Expenditure on internally developed intangible assets
Purchase of investments
Proceeds from disposals of property, plant and equipment
Gross proceeds from business disposals
Payments on business disposals
Dividends received from joint ventures
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders of the parent companies
Distributions to non-controlling interests
Increase in short-term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Acquisition of non-controlling interest
Repurchase of ordinary shares
Purchase of shares by employee benefit trust
Proceeds on issue of ordinary shares
Net cash used in financing activities
Note
4
137
2014
€m
2013
€m
2,295
(172)
16
(432)
1,707
(491)
(83)
(252)
(7)
12
97
(31)
55
(700)
(701)
(9)
288
730
(372)
(12)
(19)
(744)
(48)
56
(831)
2,293
(236)
6
(427)
1,636
(261)
(67)
(296)
(12)
7
367
(137)
26
(373)
(648)
(7)
199
217
(1,080)
(12)
–
(708)
–
148
(1,891)
Increase/(decrease) in cash and cash equivalents
4
176
(628)
Movement in cash and cash equivalents
At start of year
Increase/(decrease) in cash and cash equivalents
Exchange translation differences
At end of year
158
176
22
356
788
(628)
(2)
158
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138 FINANCIAL STATEMENTS AND OTHER INFORMATION
SUMMARY COMBINED FINANCIAL STATEMENTS IN EUROS
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Goodwill
Intangible assets
Investments in joint ventures
Other investments
Property, plant and equipment
Deferred tax assets
Derivative financial instruments
Current assets
Inventories and pre-publication costs
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings
Taxation
Provisions
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Net pension obligations
Provisions
Liabilities associated with assets held for sale
Total liabilities
Net assets
Capital and reserves
Combined share capitals
Combined share premiums
Combined shares held in treasury
Translation reserve
Other combined reserves
Combined shareholders’ equity
Non-controlling interests
Total equity
Note
2014
€m
2013
€m
4
5
5
2
6,425
4,082
161
144
293
599
101
11,805
183
1,918
40
356
2,497
–
14,302
3,400
30
872
751
24
5,077
92
4,062
1,362
815
134
6,465
3
11,545
2,757
5,491
3,749
150
110
285
530
77
10,392
171
1,699
149
158
2,177
25
12,594
3,114
5
778
705
20
4,622
16
3,159
1,291
455
139
5,060
4
9,686
2,908
273
3,638
(1,428)
285
(51)
2,717
40
2,757
269
3,464
(1,757)
25
867
2,868
40
2,908
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RELX Group Annual Reports and Financial Statements 2014
Combined statement of changes in equity
Balance at 1 January 2013
Total comprehensive income for the year
Dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Increase in share based remuneration
reserve (net of tax)
Settlement of share awards
Exchange differences on translation of
capital and reserves
Balance at 1 January 2014
Total comprehensive income for the year
Dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Cancellation of shares
Increase in share based remuneration
reserve (net of tax)
Settlement of share awards
Acquisitions
Acquisition of non-controlling interest
Exchange differences on translation of
capital and reserves
Balance at 31 December 2014
Combined
share
capitals
€m
274
–
–
1
–
Combined
share
premiums
€m
3,354
–
–
147
–
Combined
shares held
in treasury
€m
(1,106)
–
–
–
(708)
Translation
reserve
€m
161
(171)
–
–
–
–
–
(6)
269
–
–
2
–
(14)
–
–
–
–
–
–
(37)
3,464
–
–
54
–
–
–
–
–
–
–
47
10
(1,757)
–
–
–
(792)
1,153
–
33
–
–
–
–
35
25
371
–
–
–
–
–
–
–
–
16
273
120
3,638
(65)
(1,428)
(111)
285
Other
combined
reserves
€m
Combined
share-
holders’
equity
€m
Non-
controlling
interests
€m
121
1,386
(648)
–
–
57
(47)
(2)
867
872
(701)
–
–
(1,139)
60
(33)
–
(17)
40
(51)
2,804
1,215
(648)
148
(708)
57
–
–
2,868
1,243
(701)
56
(792)
–
60
–
–
(17)
–
2,717
42
6
(7)
–
–
–
–
(1)
40
6
(9)
–
–
–
–
–
1
(2)
4
40
139
Total
equity
€m
2,846
1,221
(655)
148
(708)
57
–
(1)
2,908
1,249
(710)
56
(792)
–
60
–
1
(19)
4
2,757
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140
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
1 Segment analysis
ANALYSIS BY BUSINESS SEGMENT
Revenue
Operating profit
Adjusted operating profit
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Sub-total
Corporate costs
Total
2014
€m
2,540
1,784
1,731
1,104
7,159
–
7,159
2013
€m
2,509
1,746
1,849
1,017
7,121
–
7,121
2014
€m
848
467
214
216
1,745
(7)
1,738
Restated
2013
€m
817
436
190
187
1,630
(6)
1,624
2014
€m
945
627
322
269
2,163
(7)
2,156
Restated
2013
€m
929
598
295
248
2,070
(6)
2,064
Share of post-tax results of joint ventures of €44m (2013: €35m) included in operating profit comprises €20m (2013: €7m) relating to
Legal and €24m (2013: €28m) relating to Exhibitions.
ANALYSIS OF REVENUE BY GEOGRAPHICAL ORIGIN
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY GEOGRAPHICAL MARKET
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY FORMAT
Electronic
Print
Face-to-face
Total
2014
€m
3,576
1,256
789
851
687
7,159
2014
€m
3,569
564
190
1,306
1,530
7,159
2014
€m
4,761
1,255
1,143
7,159
2013
€m
3,661
1,162
774
824
700
7,121
2013
€m
3,637
523
196
1,267
1,498
7,121
2013
€m
4,686
1,378
1,057
7,121
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RELX Group Annual Reports and Financial Statements 2014
141
1 Segment analysis continued
ANALYSIS OF REVENUE BY TYPE
Subscriptions
Transactional
Advertising
Total
2014
€m
3,678
3,313
168
7,159
2013
€m
3,672
3,166
283
7,121
ANALYSIS BY BUSINESS SEGMENT
Expenditure on
acquired goodwill and
intangible assets
Capital
expenditure
additions
Amortisation
of acquired
intangible assets
Depreciation and
other amortisation
Scientific, Technical & Medical
Risk & Business Information
Legal
Exhibitions
Total
2014
€m
31
409
59
29
528
2013
€m
59
199
18
66
342
2014
€m
69
66
180
33
348
2013
€m
110
51
200
18
379
2014
€m
98
144
71
42
355
Restated
2013
€m
101
151
76
47
375
2014
€m
116
42
117
19
294
Restated
2013
€m
118
39
119
18
294
Capital expenditure comprises additions to property, plant and equipment and internally developed intangible assets. Amortisation of
acquired intangible assets includes amounts in respect of joint ventures of €4m (2013: nil) in Legal and €1m (2013: €1m) in Exhibitions.
Other than the depreciation and amortisation above, non cash items include €40m (2013: €37m) relating to the recognition of share
based remuneration and comprise €14m (2013: €13m) in Scientific, Technical & Medical, €10m (2013: €10m) in Risk & Business
Information, €9m (2013: €8m) in Legal and €7m (2013: €6m) in Exhibitions.
ANALYSIS OF NON-CURRENT ASSETS BY GEOGRAPHICAL LOCATION
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2014
€m
8,474
904
140
1,053
534
11,105
2013
€m
7,549
701
150
904
481
9,785
Non-current assets by geographical location exclude amounts relating to deferred tax assets and derivative financial instruments.
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142
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
2 Pension schemes
The pension expense recognised within operating expense is:
ANALYSIS OF REVENUE BY FORMAT
Defined benefit pension expense
Defined contribution pension expense
Total
2014
€m
60
58
118
2013
€m
16
56
72
The amounts recognised in the income statement in respect of defined benefit pension schemes during the year are presented by major
scheme as follows:
Service cost
Settlement, past service and curtailment
credits
Defined benefit pension expense
Net interest on net defined benefit obligation
Net defined benefit pension expense
2014
2013
UK
€m
39
–
39
10
49
US
€m
22
–
22
5
27
NL
€m
17
(18)
(1)
4
3
Total
€m
78
(18)
60
19
79
UK
€m
34
–
34
7
41
US
€m
34
(60)
(26)
10
(16)
NL
€m
18
(10)
8
5
13
Total
€m
86
(70)
16
22
38
Net interest on defined benefit pension scheme liabilities is presented within net finance costs in the income statement. Service cost,
including settlements, past service credits and curtailments is presented within operating expenses.
The amount recognised in the statement of financial position in respect of defined benefit pension schemes at the start and end of the
year and the movements during the year were as follows:
Defined benefit obligation
At start of year
Service cost
Settlements, past service and
curtailment credits
Interest on pension scheme liabilities
Actuarial (loss)/gain on financial
assumptions
Actuarial (loss)/gain arising from
experience assumptions
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
Fair value of scheme assets
At start of year
Interest income on plan assets
Return on assets excluding amounts
included in interest income
Contributions by employer
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
UK
€m
(3,458)
(39)
–
(161)
2014
US
€m
(915)
(22)
–
(48)
NL
€m
Total
€m
UK
€m
2013
US
€m
NL
€m
Total
€m
(859)
(17)
(5,232)
(78)
(3,264)
(34)
(1,135)
(34)
(856)
(18)
(5,255)
(86)
18
(31)
18
(240)
–
(144)
60
(49)
(420)
(132)
(149)
(701)
(204)
101
32
(9)
119
(278)
(4,214)
(4)
–
64
(145)
(1,202)
6
(6)
34
–
(1,004)
34
(15)
217
(423)
(6,420)
3,229
151
136
45
9
(119)
251
3,702
811
43
90
38
–
(64)
127
1,045
737
27
111
11
6
(34)
–
858
4,777
221
337
94
15
(217)
378
5,605
9
(7)
111
75
(3,458)
3,095
137
131
42
7
(111)
(72)
3,229
(12)
–
110
44
(915)
874
39
5
39
–
(110)
(36)
811
10
(30)
21
(3)
(6)
22
1
(859)
713
25
(1)
17
6
(22)
(1)
737
70
(223)
(82)
(6)
(13)
243
120
(5,232)
4,682
201
135
98
13
(243)
(109)
4,777
Net defined benefit pension obligation
(512)
(157)
(146)
(815)
(229)
(104)
(122)
(455)
* included in benefits paid are settlements of nil (2013: €61m).
As at 31 December 2014, the defined benefit obligations comprise €6,171m (2013: €5,040m) in relation to funded schemes and €249m
(2013: €192m) in relation to unfunded schemes.
94118_Reed_AR_p135-145.indd 142
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RELX Group Annual Reports and Financial Statements 2014
143
3 Adjusted figures
The Group uses adjusted figures as additional performance measures. Adjusted operating profit excludes amortisation of acquired
intangible assets, acquisition-related costs and the share of taxes in joint ventures. Acquisition-related costs relate to acquisition
integration, transaction-related fees, and those elements of deferred and contingent consideration required to be expensed under IFRS.
Adjusted profit before tax also excludes disposal-related and other non-operating items and the net financing charge or credit on
defined benefit pension schemes. The adjusted tax charge excludes the tax effect of these adjusting items, and movements on deferred
tax assets and liabilities related to goodwill and acquired intangible assets. It includes the benefit of tax amortisation where available on
goodwill and acquired intangible assets. Adjusted cash flow is measured after net capital expenditure and dividends from joint ventures
but before payments in relation to prior year exceptional restructuring programmes and acquisition-related costs. Adjusted figures are
derived as follows:
Operating profit
Adjustments:
Amortisation of acquired intangible assets
Acquisition-related costs
Reclassification of tax in joint ventures
Adjusted operating profit
Profit before tax
Adjustments:
Amortisation of acquired intangible assets
Acquisition-related costs
Reclassification of tax in joint ventures
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Adjusted profit before tax
Tax charge
Adjustments:
Deferred tax movements on goodwill and acquired intangible assets
Tax on acquisition-related costs
Reclassification of tax in joint ventures
Tax on net financing charge on defined benefit pension schemes
Tax on disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted tax charge
Profit attributable to parent companies’ shareholders
Adjustments (post tax):
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted profit attributable to parent companies’ shareholders
Cash generated from operations
Dividends received from joint ventures
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Expenditure on internally developed intangible assets
Payments in relation to exceptional restructuring costs
Payments in relation to acquisition-related costs
Adjusted cash flow
2014
€m
1,738
355
37
26
2,156
2013
€m
1,624
375
51
14
2,064
1,523
1,412
355
37
26
19
14
1,974
375
51
14
22
(19)
1,855
(333)
(96)
(8)
(11)
(26)
(5)
3
(84)
(464)
9
(14)
(14)
(7)
40
(354)
(436)
1,184
1,310
347
26
14
17
(84)
1,504
2,295
55
(83)
12
(252)
–
34
2,061
384
37
15
21
(354)
1,413
2,293
26
(67)
7
(296)
14
33
2,010
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
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144
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
4 Statement of cash flows
RECONCILIATION OF OPERATING PROFIT BEFORE JOINT VENTURES TO CASH GENERATED FROM OPERATIONS
Operating profit before joint ventures
Amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Share based remuneration
Total non-cash items
Decrease in inventories and pre-publication costs
(Increase)/decrease in receivables
Decrease in payables
Increase in working capital
Cash generated from operations
RECONCILIATION OF NET BORROWINGS
At start of year
Cash & cash
equivalents
€m
158
Borrowings
€m
(3,937)
Related
derivative
financial
instruments
€m
93
Increase/(decrease) in cash and cash equivalents
Net movement in short-term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Change in net borrowings resulting from cash flows
Borrowings in acquired business
Inception of finance leases
Fair value and other adjustments to borrowings and related derivatives
Exchange translation differences
At end of year
176
–
–
–
–
176
–
–
–
22
356
–
(299)
(730)
372
12
(645)
(25)
(4)
97
(420)
(4,934)
–
11
–
–
–
11
–
–
(105)
–
(1)
2014
€m
1,694
350
196
98
40
684
3
(82)
(4)
(83)
2,295
2014
€m
(3,686)
176
(288)
(730)
372
12
(458)
(25)
(4)
(8)
(398)
(4,579)
2013
€m
1,589
374
189
105
37
705
12
6
(19)
(1)
2,293
2013
€m
(3,846)
(628)
(199)
(217)
1,080
12
48
–
(14)
(1)
127
(3,686)
Net borrowings comprise cash and cash equivalents, loan capital, finance leases, promissory notes, bank and other loans, derivative
financial instruments that are used to hedge certain borrowings, and adjustments in respect of cash collateral received/paid.
5 Borrowings
Financial liabilities measured at amortised cost:
Short-term bank loans, overdrafts and commercial paper
Term debt
Finance leases
Term debt in fair value hedging relationships
Term debt previously in fair value hedging relationships
Total
2014
Falling due
within
1 year
€m
Falling due in
more than
1 year
€m
707
–
9
–
156
872
–
2,352
6
1,227
477
4,062
Total
€m
707
2,352
15
1,227
633
4,934
2013
Falling due
within
1 year
€m
Falling due in
more than
1 year
€m
344
–
11
288
135
778
–
1,468
9
1,126
556
3,159
Total
€m
344
1,468
20
1,414
691
3,937
The total fair value of financial liabilities measured at amortised cost is €3,350m (2013: €2,051m). The total fair value of other loans in
fair value hedging relationships is €1,348m (2013: €1,546m). The total fair value of other loans previously in fair value hedging
relationships is €759m (2013: €780m).
In 2013, €223m principal amount of term debt maturing in 2019 was exchanged for €282m principal amount of term debt maturing in
2022 and cash. The exchange is treated as a debt modification for accounting purposes. The premium is offset against the carrying
amount of the newly issued term debt maturing in 2022 and will be amortised over its life.
94118_Reed_AR_p135-145.indd 144
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RELX Group Annual Reports and Financial Statements 2014
145
5 Borrowings continued
Analysis by year of repayment
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
After 1 year
Total
2014
2013
Short-term
bank loans,
overdrafts
and
commercial
paper
€m
707
–
–
–
–
–
–
707
Term debt
€m
156
516
794
312
713
1,721
4,056
4,212
Finance
leases
€m
9
5
1
–
–
–
6
15
Total
€m
872
521
795
312
713
1,721
4,062
4,934
Short-term
bank loans,
overdrafts
and
commercial
paper
€m
344
–
–
–
–
–
–
344
Term debt
€m
423
209
480
409
217
1,835
3,150
3,573
Finance
leases
€m
11
6
3
–
–
–
9
20
Total
€m
778
215
483
409
217
1,835
3,159
3,937
Short-term bank loans, overdrafts and commercial paper were backed up at 31 December 2014 by a $2,000m (€1,656m) committed
bank facility maturing in July 2019, which was undrawn.
Analysis by currency
US dollars
£ sterling
Euro
Other currencies
Total
2014
2013
Short-term
bank loans,
overdrafts and
commercial
paper
€m
328
89
289
1
707
Term debt
€m
2,306
1,316
590
–
4,212
Finance
leases
€m
15
–
–
–
15
Total
€m
2,649
1,405
879
1
4,934
Short-term
bank loans,
overdrafts and
commercial
paper
€m
104
32
201
7
344
Term debt
€m
2,160
863
550
–
3,573
Finance
leases
€m
20
–
–
–
20
Total
€m
2,284
895
751
7
3,937
Included in the US dollar amounts for term debt above is €579m (2013: €512m) of debt denominated in euros (€350m; 2013: nil) and
Swiss francs (CHF 275m; 2013: CHF 625m) that was swapped into US dollars on issuance and against which there are related derivative
financial instruments, which, as at 31 December 2014, had a fair value of €51m (2013: €97m).
6 Exchange rates
Sterling to euro
US dollars to euro
Income statement
2014
0.81
1.33
2013
0.85
1.32
Statement of
financial position
2014
0.78
1.21
2013
0.83
1.38
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94118_Reed_AR_p146-159.indd 146
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RELX Group Annual Reports and Financial Statements 2014
147
Reed Elsevier PLC
Annual Report and
Financial Statements
In this section
148 Directors’ report
152 Consolidated financial statements
154 Group accounting policies
155 Notes to the consolidated
financial statements
160 Parent company financial statements
161 Parent company accounting policies
161 Notes to the parent company
financial statements
162 Independent auditor’s report
164 5 year summary
Company number: 77536
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148 FINANCIAL STATEMENTS AND OTHER INFORMATION
DIRECTORS’ REPORT
Directors’ report
The Directors present their report, together with the financial
statements of the Group and Reed Elsevier PLC (“the Company”),
for the year ended 31 December 2014.
As a consequence of the merger of Reed Elsevier PLC’s
businesses with those of Reed Elsevier NV, and the Governing
Agreement regulating the relationship including board
composition and economic interests of the parties, the
shareholders of Reed Elsevier PLC and Reed Elsevier NV can be
regarded as having the interests of a single economic group. The
combined financial statements represent the combined interests
of both sets of shareholders and encompass the businesses of
Reed Elsevier Group plc, Elsevier Reed Finance BV and their
subsidiaries, associates and joint ventures, together with the parent
companies, Reed Elsevier PLC and Reed Elsevier NV (“the
combined businesses”). This Directors’ report and the financial
statements of the group and Company should be read in
conjunction with the combined financial statements and other
reports set out on pages 2 to 145. A review of the combined
businesses and their performance in the year is set out on pages 7
to 35, a summary of the principal risks facing the Group is set out
on pages 58 to 60, and the Group statement on corporate
responsibility is set out on pages 37 to 47.
Effective 25 February 2015, Reed Elsevier PLC and Reed Elsevier
NV transferred their ownership interests in Elsevier Reed Finance
BV to Reed Elsevier Group plc and named this newly combined
single group entity RELX Group plc, as part of a proposed
simplification and modernisation of the corporate structure,
equalisation arrangements and corporate entity names. A full
description is set out on pages 66 and 67.
Financial statement presentation
The consolidated financial statements of Reed Elsevier PLC
include the 52.9% economic interest that shareholders have under
the equalisation arrangements in the combined businesses,
accounted for on an equity basis.
Dividends paid to Reed Elsevier PLC and Reed Elsevier NV
shareholders are, other than in special circumstances, equalised
at the gross level inclusive of the UK tax credit available to certain
Reed Elsevier PLC shareholders. Because of the tax credit, Reed
Elsevier PLC normally requires proportionately less cash to fund
its net dividend than Reed Elsevier NV does to fund its gross
dividend. An adjustment is therefore required in the consolidated
income statement of Reed Elsevier PLC to share this tax benefit
between the two sets of shareholders in accordance with the
equalisation agreement. The equalisation adjustment arises on
dividends paid by Reed Elsevier PLC to its shareholders and it
reduced the consolidated attributable earnings by £15m (2013:
£15m), being 47.1% of the total amount of the tax credit.
In addition to the reported figures, adjusted profit figures are
presented as additional performance measures used by
management. These exclude the tax credit equalisation
adjustment and, in relation to the results of joint ventures,
Reed Elsevier PLC’s share of amortisation of acquired intangible
assets, acquisition-related costs, disposal gains and losses and
other non-operating items, related tax effects, and movements
in deferred taxation assets and liabilities related to acquired
intangible assets and include the benefit of tax amortisation
where available on acquired goodwill and intangible assets.
Consolidated income statement
Reed Elsevier PLC’s shareholders’ 52.9% share of the adjusted
profit before tax of the combined businesses was £842m (2013:
£832m). Reported profit before tax, including the Reed Elsevier
PLC shareholders’ share of amortisation charges, acquisition-
related costs and disposals and other non-operating items, was
£493m (2013: £576m). The decrease reflects the non-recurring
deferred tax credits in 2013.
Elsevier achieved good growth in primary research submissions
and usage, and in databases and tools, across the scientific,
technical and medical segments. At Risk & Business Information,
all business segments achieved strong growth. Legal maintained
positive underlying revenue growth despite subdued market
conditions in the US and Europe. Exhibitions achieved strong
underlying growth and continued to actively pursue growth
opportunities through new launches and small acquisitions.
The overall adjusted operating margin was 1.1 percentage points
higher despite investment in global technology platforms and new
products and services, reflecting a combination of process
innovation, portfolio development and currency effects.
Reed Elsevier PLC’s shareholders’ share of the adjusted profit
attributable to the combined businesses was £642m (2013:
£633m). After deducting Reed Elsevier PLC’s share of the post tax
charge for amortisation of acquired intangible assets, and
acquisition-related costs, disposal-related and other non-
operating items, the net financing charge on defined benefit
pension schemes, and movements on deferred taxes related to
acquired intangible assets, the reported net profit for the year was
£490m (2013: £572m).
Adjusted earnings per share increased 2.3p to 56.3p (2013: 54.0p).
At constant rates of exchange, the adjusted earnings per share
were 10% higher. Including the effect of the tax credit equalisation
as well as amortisation of acquired intangible assets, acquisition-
related costs, disposal-related and other non-operating items, the
net financing charge on defined benefit pension schemes, and tax
adjustments, the basic earnings per share were 43.0p (2013: 48.8p).
Consolidated statement of financial position
The consolidated statement of financial position of Reed Elsevier
PLC reflects its economic interest in the net assets of the Group
which as at 31 December 2014 was £1,117m (2013: £1,266m). The
£149m decrease in net assets reflects dividends paid and shares
repurchased, partially offset by Reed Elsevier PLC’s share in the
comprehensive income of the Group.
Dividends
The Board is recommending an equalised final dividend of 19.00p
per ordinary share (2013: 17.95p). This gives total ordinary
dividends for the year of 26.00p (2013: 24.60p). The final dividend
will be paid on 22 May 2015 to shareholders on the Register on
1 May 2015.
Dividend cover, based on adjusted earnings per share and the total
interim and proposed final dividends for the year, is 2.2 times.
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
adopted dividend policies in recent years in respect of their
equalised dividends that, subject to currency considerations, grow
dividends broadly in line with adjusted earnings per share whilst
maintaining dividend cover (being the number of times the annual
dividend is covered by the adjusted earnings per share) of at least
2.0 times over the longer term.
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RELX Group Annual Reports and Financial Statements 2014
149
The total dividend paid on the ordinary shares in the financial year
was £285m (2013: £278m).
Parent company financial statements
The individual parent company financial statements of
Reed Elsevier PLC are presented on page 160, and were prepared
under UK Generally Accepted Accounting Practice (UK GAAP).
Distributable reserves as at 31 December 2014 were £1,459m
(2013: £1,449m), comprising reserves less shares held in treasury.
Parent company shareholders’ funds as at 31 December 2014
were £3,074m (2013: £3,044m).
Corporate Governance
Reed Elsevier PLC has complied throughout the year with the
provisions of the UK Corporate Governance Code issued by the
FRC in September 2012 (the UK Code). The UK Code is publicly
available at www.frc.org.uk. Details of how the principles of the
UK Code have been applied and the Directors’ statement on
internal control are set out in the Corporate Governance report
on pages 66 to 73. The FRC published a revised UK Corporate
Governance Code in September 2014 (the 2014 Code) which applies
to accounting periods beginning on or after 1 October 2014. The
Board expects to comply in full with the 2014 Code during 2015.
Details of the role and responsibilities, membership and activities
of the Audit Committees, including Reed Elsevier PLC’s Audit
Committee, are set out in the Report of the Audit Committees on
pages 89 to 90.
Greenhouse Gas Emissions
Reed Elsevier PLC is required to state the annual quantity of
emissions in tonnes of carbon dioxide equivalent from group
operational activities. Details of our emissions during the year
ended 31 December 2014 and the actions being taken to reduce
them are set out in the Corporate Responsibility section of the
Strategic Report on pages 46 and 47 and form part of the Directors’
report disclosures. Further details can be found in our online
Corporate Responsibility Report at www.relxgroup.com/go/
CRReport.
Directors
The following served as Directors of the Company during the year:
A Habgood (Chairman)
E Engstrom (Chief Executive Officer)
D Palmer (Chief Financial Officer until 1 September 2014;
resigned 24 September 2014)
N Luff (joined as Chief Financial Officer on 1 September 2014)
W Hauser
A Hennah
L Hook (Senior Independent Director)
R Polet
L Sanford
B van der Veer
Biographical details of the Directors at the date of this report are
given on pages 62 and 63.
Directors are appointed in accordance with the Articles of
Association (the Articles), which provide that any director
appointed during the year holds office only until the next following
Annual General Meeting (AGM) and is then eligible for election by
the shareholders. Reed Elsevier PLC’s Articles provide that at
every AGM of Reed Elsevier PLC, one-third of the directors
(or if their number is not a multiple of three the number nearest
to one-third) shall retire from office and, if they wish, put
themselves up for re-election by the shareholders. The UK Code
recommends that all directors should seek re-election by
shareholders annually. Accordingly, the Board has adopted
this practice.
The office of director shall be vacated if he or she: (i) resigns;
(ii) becomes bankrupt or compounds with his or her creditors
generally; (iii) is or may be suffering from a mental illness;
(iv) is prohibited by law from being a director; or (v) is removed
from office pursuant to the Company’s Articles. Subject to the
shareholders’ rights to appoint individuals to the Board in
accordance with the Company’s Articles, no individual may be
appointed to the Board unless such appointment is recommended
by the Nominations Committee.
Duncan Palmer stepped down as Chief Financial Officer on
1 September 2014 and left the Group on 24 September 2014.
Nick Luff was elected as a Director by shareholders at the AGM
in April 2014. He joined the Board as Chief Financial Officer on
1 September 2014.
In accordance with the provisions of the UK Code, all of the
Directors will retire from the Board at the AGM in 2015 and, being
eligible, they will each offer themselves for re-election. Taking into
account the assessment by the Corporate Governance Committee
of the qualifications, performance and effectiveness of each
individual Director seeking re-election, the Board has accepted a
recommendation from the Nominations Committee that each
Director be proposed for re-election at the 2015 AGM.
The notice period applicable to the service contracts of Erik
Engstrom and Nick Luff is 12 months. The remaining Directors
seeking re-election at the 2015 AGM do not have service contracts.
Details of Directors’ remuneration and their interests in the
share capital of Reed Elsevier PLC are provided in the Directors’
Remuneration Report on pages 75 to 88.
Share capital
Reed Elsevier PLC’s issued share capital comprises a single class
of ordinary shares, all of which are listed on the London Stock
Exchange. All issued shares are fully paid up and carry no
additional obligations or special rights. Each share carries the
right to one vote at general meetings of Reed Elsevier PLC. In a
general meeting, subject to any rights and restrictions attached to
any shares, on a show of hands every member who is present in
person shall have one vote and every proxy present who has been
duly appointed by one or more members entitled to vote on the
resolution has one vote (although a proxy has one vote for and one
vote against the resolution if: (i) the proxy has been duly appointed
by more than one member entitled to vote on the resolution; and (ii)
the proxy has been instructed by one or more of those members to
vote for the resolution and by one or more other of those members
to vote against it). Subject to any rights or restrictions attached to
any shares, on a vote on a resolution on a poll every member
present in person or by proxy shall have one vote for every share of
which he is the holder. Proxy appointments and voting instructions
must be received by the registrars not less than 48 hours before a
general meeting. There are no specific restrictions on the size of a
holding nor on the transfer of shares, which are both governed by
the general provisions of the Articles and prevailing legislation.
Reed Elsevier PLC is not aware of any agreements between
shareholders that may result in restrictions on the transfer of
shares or on voting rights attached to the shares.
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150 FINANCIAL STATEMENTS AND OTHER INFORMATION
DIRECTORS’ REPORT
At the 2014 AGM, shareholders passed a resolution authorising
the Directors to allot shares up to a nominal value of £9m,
representing less than 5% of the Reed Elsevier PLC issued share
capital. Since the 2014 AGM, no shares have been issued under
this authority. The shareholder authority also permitted the
Directors to allot shares in order to satisfy entitlements under
employee share plans, and details of such allotments are noted
below. The authority to allot shares will expire at the 2015 AGM,
and a resolution to further extend the authority will be submitted
to the shareholders at the 2015 AGM.
During the year, 3,360,624 ordinary shares in Reed Elsevier PLC
were issued in order to satisfy entitlements under employee share
plans as follows: 497,870 under a UK Sharesave option scheme at
prices between 401.60p and 708.80p per share; 2,744,793 under
executive share option schemes at prices between 466.50p and
991p per share; and 117,961 under the Long Term Incentive Plan at
511.50p per share.
The issued share capital as at 31 December 2014 is shown in note
11 to the consolidated financial statements.
Authority to purchase shares
At the 2014 AGM, shareholders passed a resolution authorising
the purchase of up to 126.7 million ordinary shares in Reed
Elsevier PLC (representing less than 10% of the issued ordinary
shares) by market purchase. During the year, 35,251,501 ordinary
shares were purchased under this and the previous authority.
On 29 December 2014, 65 million ordinary treasury shares
were cancelled. Therefore, as at 31 December 2014 there were
69,698,335 ordinary shares held in treasury, representing 5.8%
of the issued ordinary shares. A further 4,815,950 ordinary shares
were purchased between 2 January 2015 and the date of this
report. The authority to make market purchases will expire at the
2015 AGM, at which a resolution to further extend the authority
will be submitted to shareholders.
Substantial share interests
As at 25 February 2015, Reed Elsevier PLC had been notified by the
following shareholders that they held an interest of 3% or more in
voting rights of its issued share capital:
§§ BlackRock Inc
§§ Invesco Limited
§§ Lloyds Banking Group plc
§§ Legal & General Group plc
5.03%
5.03%
3.47%
3.40%
The percentage interests stated above are as disclosed at the date
on which the interests were notified to Reed Elsevier PLC.
Employee Benefit Trust
The Trustee of the Employee Benefit Trust held an interest in
8,032,643 ordinary shares in Reed Elsevier PLC (representing
0.7% of the issued ordinary shares) as at 31 December 2014.
The Trustee may vote or abstain from voting any shares it holds
in any way it sees fit.
Significant agreements – change of control
The Governing Agreement between Reed Elsevier PLC and
Reed Elsevier NV states that upon a change of control of
Reed Elsevier PLC (for these purposes, the acquisition by a third
party of 50% or more of the issued share capital having voting
rights), should there not be a comparable offer from the offeror
for Reed Elsevier NV, Reed Elsevier NV may serve notice upon
Reed Elsevier PLC varying certain provisions of the Governing
Agreement, including the governance and the standstill provisions.
There are a number of borrowing agreements including credit
facilities that in the event of a change of control of both
Reed Elsevier PLC and Reed Elsevier NV and, in some cases,
a consequential credit rating downgrade to sub-investment
grade may, at the option of the lenders, require repayment
and/or cancellation as appropriate.
Powers of directors
Subject to the provisions of the Companies Act 2006, the
Reed Elsevier PLC Articles and any directions given by
special resolutions, the business of Reed Elsevier PLC shall be
managed by the Board which may exercise all the powers of
Reed Elsevier PLC.
Directors’ indemnity
In accordance with its Articles, Reed Elsevier PLC has granted
Directors an indemnity, to the extent permitted by law, in respect of
liabilities incurred as a result of their office. Reed Elsevier PLC also
purchased and maintained throughout the year Directors’ and
Officers’ liability insurance in respect of itself and its Directors.
Related party transactions
Internal controls are in place to ensure that any related party
transactions involving Directors or their connected persons are
carried out on an arm’s length basis and are properly recorded and
disclosed where appropriate.
Conflicts of interest
The Reed Elsevier PLC Articles permit the Board to approve
situations where a Director has an interest that conflicts, or may
possibly conflict, with the interests of Reed Elsevier PLC. The
Board has established a formal system whereby the Nominations
Committee considers any such conflict or potential conflict and
makes a recommendation to the Board on whether to authorise it.
In reaching its decision, the Board is required to act in a way it
considers would be most likely to promote the success of Reed
Elsevier PLC and may impose limits or conditions when giving its
authorisation, if it thinks this is appropriate.
Political donations
The Group does not make donations to European Union (EU)
political organisations or incur EU political expenditure. In the US,
the Group companies donated £55,793 (2013: £48,000) to political
organisations. In line with US law, these donations were not made
at federal level, but only to candidates and political parties at the
state and local levels.
Disclosures required under UK Listing Rule 9.8.4
The following information is disclosed pursuant to Listing Rule 9.8.4:
Long-term incentive schemes – page 80;
Dividend waivers – page 158, note 11.
Financial Statements and accounting records
The Directors are responsible for preparing the Directors’ report
and the financial statements in accordance with applicable law
and regulations.
94118_Reed_AR_p146-159.indd 150
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RELX Group Annual Reports and Financial Statements 2014
151
Neither Reed Elsevier PLC nor the Directors accept any liability to
any person in relation to the Annual Report except to the extent
that such liability could arise under English law. Accordingly, any
liability to a person who has demonstrated reliance on any untrue
or misleading statement or omission shall be determined in
accordance with Section 90A of the Financial Services and
Markets Act 2000.
Disclosure of information to auditors
As part of the process of approving the Reed Elsevier PLC 2014
financial statements, the Directors have taken steps pursuant to
section 418(2) of the Companies Act 2006 to ensure that they are
aware of any relevant audit information and to establish that
the Reed Elsevier PLC auditors are aware of that information.
In that context, so far as the Directors are aware, there is no
relevant audit information of which Reed Elsevier PLC’s auditors
are unaware.
Going concern
The Directors, having made appropriate enquiries, consider that
adequate resources exist for the combined businesses to continue
in operational existence for the foreseeable future and that,
therefore, it is appropriate to adopt the going concern basis in
preparing the 2014 financial statements. In reaching this
conclusion, the Directors have had due regard to the combined
businesses’ financial position as at 31 December 2014, the strong
free cash flow of the combined businesses, the Group’s ability to
access capital markets and the principal risks facing the Group.
No material uncertainties have been identified.
A commentary on the combined businesses’ cash flows, financial
position and liquidity for the year ended 31 December 2014 is set out
in the Chief Financial Officer’s Report on pages 50 to 57. This
shows that, after taking account of available cash resources and
committed bank facilities that back up short term borrowings, all of
the Group’s borrowings that mature within the next two years can
be covered. The Group’s policies on liquidity, capital management
and management of risks relating to interest rate, foreign
exchange and credit exposures are set out on pages 120 to 123.
The principal risks facing the Group are set out on pages 58 to 60.
Auditors
Resolutions for the re-appointment of Deloitte LLP as auditors
of Reed Elsevier PLC and to authorise the Directors to fix their
remuneration will be submitted to shareholders at the 2015 AGM.
By order of the Board
Registered Office
Henry Udow
Company Secretary
25 February 2015
1-3 Strand
London
WC2N 5JR
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the consolidated financial statements in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU and Article 4 of the IAS Regulation.
The Directors have elected to prepare the parent company
financial statements in accordance with UK GAAP (United Kingdom
Accounting Standards and applicable law). Under company law the
Directors must not approve the accounts unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
In preparing the parent company financial statements, the
Directors are required to: select suitable accounting policies and
then apply them consistently; make judgements and accounting
estimates that are reasonable and prudent; state whether
applicable UK Accounting Standards have been followed, subject
to any material departures being disclosed and explained in the
financial statements; and prepare the financial statements on a
going concern basis unless it is inappropriate to presume that the
Company will continue in business.
In preparing the group financial statements, IAS1 requires that
directors: properly select and apply accounting policies; present
information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information; provide additional disclosures when compliance with
the specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and make an assessment of the company’s ability
to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain Reed Elsevier PLC’s
transactions and disclose with reasonable accuracy at any time
the financial position of Reed Elsevier PLC and enable them to
ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of
Reed Elsevier PLC and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Directors’ responsibility statement
The Board confirms that, to the best of its knowledge:
§§ the consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as issued by
the International Accounting Standards Board and as adopted
by the European Union, give a true and fair view of the financial
position and profit or loss of the group; and
§§ the Directors’ report includes a fair review of the development
and performance of the business and the position of the group.
A description of the principal risks and uncertainties facing the
group is set out on pages 58 to 60.
Having taken into account all the matters considered by the Board
and brought to the attention of the Board during the year, the
Directors are satisfied that the Annual Report and Accounts taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess Reed Elsevier
PLC’s performance, business model and strategy.
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152 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Effect of tax credit equalisation on distributed earnings
Share of results of joint ventures
Operating profit
Finance income
Profit before tax
Tax expense
Profit attributable to ordinary shareholders
Note
1
2
10
4
5
2014
£m
(2)
(15)
495
478
15
493
(3)
490
2013
£m
(2)
(15)
583
566
10
576
(4)
572
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Profit attributable to ordinary shareholders
Share of joint ventures’ other comprehensive loss for year
Total comprehensive income for the year
Earnings per ordinary share
FOR THE YEAR ENDED 31 DECEMBER
Basic earnings per share
Diluted earnings per share
Consolidated statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash used by operations
Interest received
Tax paid
Net cash used in operating activities
Cash flows from investing activities
Dividends received from joint ventures
Net cash received from investing activities
Cash flows from financing activities
Equity dividends paid
Repurchase of ordinary shares
Proceeds on issue of ordinary shares
(Increase)/decrease in net funding balances due from joint ventures
Net cash used in financing activities
2014
£m
490
(61)
429
2013
£m
572
(13)
559
Note
7
7
2014
pence
43.0
42.5
2013
pence
48.8
48.2
Note
9
10
6
9
2014
£m
2013
£m
(2)
15
(4)
9
618
618
(285)
(333)
18
(27)
(627)
(2)
10
(3)
5
102
102
(278)
(326)
50
447
(107)
Movement in cash and cash equivalents
–
–
94118_Reed_AR_p146-159.indd 152
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RELX Group Annual Reports and Financial Statements 2014
Consolidated statement of financial position
AS AT 31 DECEMBER
Non-current assets
Investments in joint ventures
Total assets
Current liabilities
Taxation
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Shares held in treasury (including in joint ventures)
Capital redemption reserve
Translation reserve
Other reserves
Total equity
153
2013
£m
1,266
1,266
2
2
1,264
182
1,257
(752)
4
40
533
1,264
Note
10,15
11
12
2014
£m
1,117
1,117
1
1
1,116
174
1,274
(593)
13
112
136
1,116
The consolidated financial statements were approved by the Board of Directors, 25 February 2015.
A J Habgood
Chairman
N L Luff
Chief Financial Officer
Consolidated statement of changes in equity
FOR THE YEAR ENDED 31 DECEMBER
Balance at 1 January 2013
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Share of joint ventures’ increase in share
based remuneration reserve (net of tax)
Share of joint ventures’ settlement of share
awards by the employee benefit trust
Equalisation adjustments
Balance at 1 January 2014
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Cancellation of shares
Share of joint ventures’ increase in share
based remuneration reserve (net of tax)
Share of joint ventures’ settlement of share
awards by the employee benefit trust
Share of joint ventures' acqusition of
non-controlling interest
Equalisation adjustments
Balance at 31 December 2014
Note
6
6
Share
capital
£m
181
–
–
1
–
Share
premium
£m
1,208
–
–
49
–
Shares
held in
treasury
£m
(447)
–
–
–
(326)
Capital
redemption
reserve
£m
4
–
–
–
–
Translation
reserve
£m
87
(47)
–
–
–
Other
reserves
£m
173
606
(278)
–
–
Total equity
£m
1,206
559
(278)
50
(326)
–
–
–
182
–
–
1
–
(9)
–
–
–
–
174
–
–
–
1,257
–
–
17
–
–
–
–
–
–
1,274
–
21
–
(752)
–
–
–
(350)
495
–
14
–
–
(593)
–
–
–
4
–
–
–
–
9
–
–
–
–
13
–
–
–
40
72
–
–
–
–
–
–
–
–
112
25
(21)
28
533
357
(285)
–
–
(495)
25
(14)
(7)
22
136
25
–
28
1,264
429
(285)
18
(350)
–
25
–
(7)
22
1,116
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154 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Group accounting policies
Basis of preparation
These consolidated financial statements have been prepared
under the historical cost convention in accordance with applicable
accounting standards. They report the consolidated statements of
income, comprehensive income, cash flow, financial position and
changes in equity of Reed Elsevier PLC (incorporated and
domiciled in the UK), and have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and as issued by the International Accounting
Standards Board (IASB).
The consolidated financial statements are prepared on a going
concern basis, as explained on page 151. Unless otherwise
indicated, all amounts shown in the financial statements are in
millions of pounds.
The combined financial statements presented in pounds sterling
on pages 92 to 95 form an integral part of the notes to Reed
Elsevier PLC’s statutory financial statements. The accounting
policies adopted in the preparation of the combined financial
statements are set out on pages 96 to 101.
Determination of profit
The Reed Elsevier PLC share of the combined results has been
calculated on the basis of the 52.9% economic interest of the Reed
Elsevier PLC shareholders in the combined businesses, after
taking account of results arising in Reed Elsevier PLC and its
subsidiaries. Dividends paid to Reed Elsevier PLC and Reed
Elsevier NV shareholders are, other than in special
circumstances, equalised at the gross level inclusive of the UK
tax credit available to certain Reed Elsevier PLC shareholders.
In Reed Elsevier PLC’s consolidated financial statements, an
adjustment is required to equalise the benefit of the tax credit
between the two sets of shareholders in accordance with the
equalisation agreement. This equalisation adjustment arises on
dividends paid by Reed Elsevier PLC to its shareholders and
reduces the consolidated attributable earnings by 47.1% of the
total amount of the tax credit.
Investments
Reed Elsevier PLC’s economic interest in the net assets of the
combined businesses has been shown on the consolidated
statement of financial position as investments in joint ventures,
net of the assets and liabilities reported as part of Reed Elsevier
PLC and its subsidiaries. Investments in joint ventures are
accounted for using the equity method.
Foreign exchange translation
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the transaction. At each
statement of financial position date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated at the
rate prevailing on the statement of financial position date. Exchange
differences arising are recorded in the income statement. The
exchange gains or losses relating to the retranslation of Reed
Elsevier PLC’s economic interest in the net assets of the combined
businesses are classified as equity and transferred to the
translation reserve. When foreign operations are disposed of, the
related cumulative translation differences are recognised within
the income statement in the period.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
which is recognised, in the same or a different period, outside profit
or loss (either in other comprehensive income, directly in equity, or
through a business combination) in which case the tax appears in
the same statement as the transaction that gave rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that
taxable profits will be available against which the deductible
temporary differences can be utilised; and reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Deferred tax is not discounted.
Critical judgements and key sources of estimation uncertainty
Critical judgements in the preparation of the combined financial
statements are set out on pages 99 to 100.
Standards and amendments effective for the year
The interpretations and amendments to IFRS effective for 2014
have not had a significant impact on the Group’s accounting
policies or reporting.
Standards, amendments and interpretations not yet effective
Recently issued standards, amendments and interpretations and
their impact on future accounting policies and reporting have been
considered on page 101 of the combined financial statements.
94118_Reed_AR_p146-159.indd 154
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RELX Group Annual Reports and Financial Statements 2014
155
Notes to the consolidated financial statements
for the year ended 31 December 2014
1 Administrative expenses
Administrative expenses include £1,371,000 (2013: £972,000) paid in the year to RELX Group plc under a contract for the services of
Directors and administrative support. Reed Elsevier PLC has no employees (2013: nil).
2 Effect of tax credit equalisation on distributed earnings
The tax credit equalisation adjustment arises on ordinary dividends paid by Reed Elsevier PLC to its shareholders and reduces the
consolidated profit attributable to ordinary shareholders by 47.1% of the total amount of the tax credit, as set out in the accounting
policies on page 154.
3 Auditor’s remuneration
Audit fees payable by Reed Elsevier PLC were £30,000 (2013: £29,000). Further information on the audit and non-audit fees paid by the
Reed Elsevier combined businesses to Deloitte LLP and its associates is set out in note 3 to the combined financial statements.
4 Finance income
Finance income from joint ventures
5 Taxation
UK corporation tax expense
2014
£m
15
2013
£m
10
2014
£m
(3)
2013
£m
(4)
2013
£m
576
(134)
136
(6)
(4)
2013
£m
200
78
278
A reconciliation of the notional tax charge based on the applicable rate of tax to the actual total tax expense is set out below.
Profit before tax
Tax at applicable rate 21.5% (2013: 23.25%)
Tax at applicable rate on share of results of joint ventures
Other
Tax expense
6 Equity dividends
ORDINARY DIVIDENDS DECLARED AND PAID IN THE YEAR
Ordinary shares
Final for prior financial year
Interim for financial year
Total
2014
£m
493
(106)
103
–
(3)
2014
£m
205
80
285
2014
pence
2013
pence
17.95p
7.00p
24.95p
17.00p
6.65p
23.65p
The Directors of Reed Elsevier PLC have proposed a final dividend of 19.00p (2013: 17.95p). The cost of funding the proposed final dividend
is expected to be £214m. No liability has been recognised at the statement of financial position date.
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Ordinary shares
Interim (paid)
Final (proposed)
Total
2014
pence
2013
pence
7.00p
19.00p
26.00p
6.65p
17.95p
24.60p
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156 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Notes to the consolidated financial statements
for the year ended 31 December 2014
7 Earnings per ordinary share (EPS)
Basic earnings per share
Based on 52.9% interest in total operations
of the combined businesses
Diluted earnings per share
2014
2013
Weighted
average
number of
shares
(millions)
1,140.2
1,140.2
1,152.7
Earnings
£m
490
505
490
EPS
pence
43.0
44.3
42.5
Weighted
average
number of
shares
(millions)
1,172.2
1,172.2
1,187.2
Earnings
£m
572
587
572
EPS
pence
48.8
50.1
48.2
The diluted EPS figures are calculated after taking account of the effect of potential additional ordinary shares arising from share
options and conditional shares.
The weighted average number of shares is after deducting shares held in treasury. Movements in the number of shares in issue net of
treasury shares for the year ended 31 December 2014 are shown in note 11.
8 Adjusted figures
Adjusted profit and earnings per share figures are used by management as additional performance measures. The adjusted figures are
derived as follows:
Reported figures
Effect of tax credit equalisation on distributed earnings
Profit attributable to ordinary shareholders based on 52.9% economic interest in the
Reed Elsevier combined businesses
Share of adjustments in joint ventures:
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted figures
Profit attributable to
ordinary shareholders
Basic earnings
per share
2014
£m
490
15
505
148
11
6
8
(36)
642
2013
£m
572
15
587
172
16
7
10
(159)
633
2014
pence
43.0
1.3
2013
pence
48.8
1.3
44.3
50.1
13.0
1.0
0.5
0.7
(3.2)
56.3
14.6
1.4
0.6
0.9
(13.6)
54.0
* Movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
9 Statement of cash flows
RECONCILIATION OF ADMINISTRATIVE EXPENSES TO CASH USED BY OPERATIONS
Administrative expenses
Cash used by operations
RECONCILIATION OF NET FUNDING BALANCES DUE FROM JOINT VENTURES
At start of year
Cash flow
At end of year
2014
£m
(2)
(2)
2014
£m
502
27
529
2013
£m
(2)
(2)
2013
£m
949
(447)
502
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RELX Group Annual Reports and Financial Statements 2014
157
10 Investments in joint ventures
Share of results of joint ventures
Share of joint ventures’ other comprehensive loss
Share of joint ventures’ acquisition of non-controlling interests
Share of joint ventures’ increase in share based remuneration reserve (net of tax)
Share of joint ventures’ purchase of treasury shares by employee benefit trust
Equalisation adjustments
Dividends received from joint ventures
Increase/(decrease) in net funding balances due from joint ventures
Net movement in the year
At start of year
At end of year
2014
£m
495
(61)
(7)
25
(17)
7
(618)
27
(149)
1,266
1,117
2013
£m
583
(13)
–
25
–
13
(102)
(447)
59
1,207
1,266
During the year the company received dividends of £500m from RELX Group plc and £118m from Elsevier Reed Finance BV.
Summarised information showing total amounts in respect of joint ventures and Reed Elsevier PLC shareholders’ share is set out below:
Revenue
Net profit for the year
Total joint ventures
2014
£m
5,773
960
2013
£m
6,035
1,115
Reed Elsevier PLC
shareholders’ share
2014
£m
3,054
495
2013
£m
3,193
583
Reed Elsevier PLC’s share of joint ventures’ net profit attributable to parent company shareholders for the year excludes the net profit
that arose directly in Reed Elsevier PLC of £10m (2013: £4m).
Reed Elsevier PLC’s other comprehensive income includes a loss of £61m (2013: £13m) relating to joint ventures.
Total assets
Total liabilities
Net assets
Attributable to:
Joint ventures
Non-controlling interests
Funding balances due from joint ventures
Total
Total joint ventures
Reed Elsevier PLC
shareholders’ share
2014
£m
11,087
(8,950)
2,137
2,106
31
2,137
2013
£m
10,495
(8,072)
2,423
2,390
33
2,423
2014
£m
5,876
(5,288)
588
588
–
588
529
1,117
2013
£m
5,552
(4,788)
764
764
–
764
502
1,266
The above amounts for Reed Elsevier PLC’s shareholders’ share of total assets and total liabilities exclude assets and liabilities held
by Reed Elsevier PLC, but include the counterparty balances of amounts owed to and by other Group businesses. Included within
Reed Elsevier PLC’s share of assets and liabilities are cash and cash equivalents of £146m (2013: £70m) and borrowings of £2,027m
(2013: £1,736m) respectively.
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158 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Notes to the consolidated financial statements
for the year ended 31 December 2014
11 Share capital and shares held in treasury
CALLED UP SHARE CAPITAL – ISSUED AND FULLY PAID
At start of year
Issue of ordinary shares
Shares cancelled
At end of year
No. of shares
1,267,036,696
3,360,624
(65,000,000)
1,205,397,320
2014
£m
182
1
(9)
174
No. of shares
1,257,597,977
9,438,719
–
1,267,036,696
2013
£m
181
1
–
182
The issue of shares relates to the exercise of share options. Details of share option and conditional share schemes are set out in note 6 to
the combined financial statements.
NUMBER OF ORDINARY SHARES
Year ended 31 December
At start of year
Issue of ordinary shares
Repurchase of ordinary shares
Net release of shares by the employee benefit trust
Shares cancelled
At end of year
Weighted average number of equivalent ordinary shares during the year
Shares in
issue
(millions)
1,267.0
3.4
–
–
(65.0)
1,205.4
Treasury
shares
(millions)
(109.6)
–
(35.2)
2.1
65.0
(77.7)
2014
Shares in
issue net of
treasury
shares
(millions)
2013
Shares in
issue net of
treasury
shares
(millions)
1,157.4
3.4
(35.2)
2.1
–
1,127.7
1,140.2
1,186.6
9.4
(41.9)
3.3
–
1,157.4
1,172.2
All of the ordinary shares rank equally with respect to voting rights and rights to receive dividends, except for shares held in treasury by
the parent company, which do not attract voting or dividend rights. The Employee Benefit Trust (EBT) has waived the right to receive
dividends on Reed Elsevier PLC shares. There are no restrictions on the rights to transfer shares.
At 31 December 2014, shares held in treasury included 8,032,643 (2013: 10,120,537) Reed Elsevier PLC ordinary shares held by the EBT
and 69,698,335 (2013: 99,446,834) Reed Elsevier PLC ordinary shares held by the parent company. The EBT purchases Reed Elsevier
PLC shares which, at the Trustee’s discretion, can be used in respect of the exercise of share options and to meet commitments under
conditional share awards. At 31 December 2014, Reed Elsevier PLC shares held by the EBT were £54m (2013: £64m) at cost. During
December 2014, 65,000,000 Reed Elsevier PLC ordinary shares held in treasury were cancelled.
12 Other reserves
At start of year
Profit attributable to ordinary shareholders
Cancellation of shares
Share of joint ventures’:
Actuarial (losses)/gains on defined benefit pension schemes
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Acquisition of non-controlling interest
Equalisation adjustments
Equity dividends paid
At end of year
13 Contingent liabilities
There are contingent liabilities in respect of borrowings of joint ventures guaranteed by Reed Elsevier PLC as follows:
Guaranteed jointly and severally with Reed Elsevier NV
2014
£m
533
490
(495)
(140)
(43)
10
40
25
(14)
(7)
22
(285)
136
2013
£m
173
572
–
21
34
(2)
(19)
25
(21)
–
28
(278)
533
2014
£m
3,607
2013
£m
3,063
Financial instruments disclosures in respect of the borrowings covered by the above guarantees are given in note 18 to the combined
financial statements.
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RELX Group Annual Reports and Financial Statements 2014
159
14 Related party transactions
All transactions with joint ventures, which are related parties of Reed Elsevier PLC, are reflected in these financial statements. Key
management personnel are also related parties and comprise the Directors of Reed Elsevier PLC. Transactions with key management
personnel are set out in note 1 and in note 28 to the combined financial statements.
15 Principal joint ventures as at 31 December 2014
Reed Elsevier Group plc
Incorporated and operating in Great Britain
1-3 Strand
London WC2N 5JR
During 2014 was a holding company for operating businesses
involved in science & medical, risk management, legal and
business publishing and organisation of trade exhibitions
Elsevier Reed Finance BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, Netherlands
During 2014 was a holding company for financing businesses
18,385 ordinary R shares
18,385 ordinary E shares
100,000 7.5% cumulative preference non voting shares
Equivalent to a 50% equity interest
133 ordinary R shares
205 ordinary E shares
Equivalent to a 39% equity interest
% holding
as at
31 December
100%
–
100%
100%
–
Principal operating locations are set out on page 197. During 2014 the E shares in Reed Elsevier Group plc and Elsevier Reed Finance BV
were owned by Reed Elsevier NV.
16 Principal subsidiary
Reed Holding BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, the Netherlands
191 ordinary shares
% holding
100%
At 31 December 2014, Reed Holding BV owned 4,038,884 (2013: 4,146,785) shares of a separate class in Reed Elsevier NV. The
equalisation arrangements entered into between Reed Elsevier PLC and Reed Elsevier NV at the time of the merger give Reed Elsevier
PLC a 5.8% economic interest in Reed Elsevier NV.
17 Events after the balance sheet date
Effective 25 February 2015, Reed Elsevier PLC transferred its direct ownership interest in Elsevier Reed Finance BV to its jointly-owned
company Reed Elsevier Group plc, for consideration of 31,613 ordinary voting shares in Reed Elsevier Group plc. Simultaneously, Reed
Elsevier NV transferred its direct ownership interest in Elsevier Reed Finance BV to Reed Elsevier Group plc, for consideration of 31,613
ordinary voting shares in Reed Elsevier Group plc. This newly-combined single group entity was named RELX Group plc. The R shares
and E shares of RELX Group plc held by Reed Elsevier PLC and Reed Elsevier NV respectively were converted into non-voting shares.
Reed Elsevier PLC has retained its 52.9% economic interest in the combined businesses, and no gain or loss was recorded on the
transaction. As Reed Elsevier PLC and Reed Elsevier NV each hold 50% of the voting shares in issue, joint control of RELX Group plc has
been retained and their respective interests will continue to be accounted for under the equity method, as described in the accounting
policies on page 154.
Subsequently, Reed Elsevier PLC transferred non-interest bearing, payable-on-demand receivables of £475m to RELX Group plc for
consideration of 2 ordinary non-voting R shares. As these R shares do not have voting rights, this transaction did not impact the
joint-control of RELX Group plc.
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160 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Parent company balance sheet
AS AT 31 DECEMBER
Fixed assets
Investments in subsidiary undertakings
Investments in joint ventures
Current assets
Debtors: amounts due from joint ventures
Creditors: amounts falling due within one year
Taxation
Amounts owed to subsidiary undertakings
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Shares held in treasury
Capital redemption reserve
Other reserves
Profit and loss reserve
Shareholders’ funds
The parent company financial statements were approved by the Board of Directors, 25 February 2015.
A J Habgood
Chairman
N L Luff
Chief Financial Officer
Parent company reconciliation of shareholders’ funds
At 1 January 2013
Profit attributable to ordinary shareholders
Equity dividends paid
Repurchase of ordinary shares
Issue of ordinary shares, net of expenses
Equity instruments granted to employees of
combined businesses
At 1 January 2014
Profit attributable to ordinary shareholders
Equity dividends paid
Repurchase of ordinary shares
Cancellation of shares
Issue of ordinary shares, net of expenses
Equity instruments granted to employees of
combined businesses
At 31 December 2014
Share
capital
£m
181
–
–
–
1
–
182
–
–
–
(9)
1
–
174
Share
premium
account
£m
1,208
–
–
–
49
–
1,257
–
–
–
–
17
–
1,274
Shares
held in
treasury
£m
(367)
–
–
(326)
–
Capital
redemption
reserve
£m
4
–
–
–
–
Other
reserves
£m
150
–
–
–
–
–
(693)
–
–
(333)
495
–
–
(531)
–
4
–
–
–
9
–
–
13
2
152
–
–
–
–
–
2
154
Profit
and loss
reserve
£m
2,314
106
(278)
–
–
–
2,142
628
(285)
–
(495)
–
–
1,990
Note
2014
£m
2013
£m
1
1
2
2
309
2,314
2,623
529
529
1
77
78
451
3,074
174
1,274
(531)
13
154
1,990
3,074
309
2,312
2,621
502
502
2
77
79
423
3,044
182
1,257
(693)
4
152
2,142
3,044
Total
£m
3,490
106
(278)
(326)
50
2
3,044
628
(285)
(333)
–
18
2
3,074
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RELX Group Annual Reports and Financial Statements 2014
161
Parent company accounting policies
Basis of preparation
The parent company financial statements have been prepared
under the historical cost convention in accordance with UK
Generally Accepted Accounting Practice (UK GAAP). Unless
otherwise indicated, all amounts in the financial statements are in
millions of pounds.
The parent company financial statements should be read in
conjunction with the consolidated financial statements and notes
presented on pages 152 to 159.
The parent company financial statements are prepared on a going
concern basis, as explained on page 151.
As permitted by section 408 of the Companies Act 2006, the
company has not presented its own profit and loss account.
The Reed Elsevier PLC accounting policies under UK GAAP are
set out below.
Investments
Fixed asset investments are stated at cost, less provision, if
appropriate, for any impairment in value. The fair value of the
award of share options and conditional shares over Reed Elsevier
PLC ordinary shares to employees of the combined businesses
are treated as a capital contribution.
Other assets and liabilities are are stated at historic cost, less
provision, if appropriate, for any impairment in value.
Shares held in treasury
The consideration paid, including directly attributable costs, for
shares repurchased is recognised as shares held in treasury and
presented as a deduction from total equity. Details of share capital
and shares held in treasury are set out in note 11 of the Reed
Elsevier PLC consolidated financial statements and note 26 of the
combined financial statements.
Foreign exchange translation
Transactions entered into in foreign currencies are recorded at
the exchange rates applicable at the time of the transaction.
Taxation
Deferred tax is provided in full for timing differences using the
liability method. Deferred tax assets are only recognised to the
extent that they are considered recoverable in the short term.
Deferred tax balances are not discounted.
Notes to the parent company financial statements
1 Investments
At 1 January 2013
Equity instruments granted to Group employees
At 1 January 2014
Equity instruments granted to Group employees
At 31 December 2014
Subsidiary
undertaking
£m
309
–
309
–
309
Joint
ventures
£m
2,310
2
2,312
2
2,314
Total
£m
2,619
2
2,621
2
2,623
Principal joint ventures and subsidiaries are set out in notes 15 and 16 of the Reed Elsevier PLC consolidated financial statements.
2 Related party transactions
All transactions with joint ventures, subsidiaries and RELX Group employees, which are related parties of Reed Elsevier PLC, are
reflected in these financial statements. Transactions with key management personnel including share based remuneration costs are set
out in note 1 and in note 28 to the combined financial statements and details of the directors’ remuneration are included in the Directors’
Remuneration Report on pages 75 to 88.
3 Events after the balance sheet date
Effective 25 February 2015, Reed Elsevier PLC transferred its direct ownership interest in Elsevier Reed Finance BV to its jointly-owned
company Reed Elsevier Group plc, for consideration of 31,613 ordinary voting shares in Reed Elsevier Group plc and this newly combined
single group entity was named RELX Group plc. Reed Elsevier PLC also transferred non-interest bearing, payable-on-demand
receivables of £475m to Reed Elsevier Group plc for consideration of 2 ordinary non-voting shares. Reed Elsevier PLC has retained its
52.9% economic interest in the combined businesses, and no gains or losses were recorded on the transactions. Further details are
provided on page 66.
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162 FINANCIAL STATEMENTS AND OTHER INFORMATION
AUDITOR’S REPORT
Independent auditor’s report to the members of Reed Elsevier PLC
Opinion on our audit of the consolidated and parent company
financial statements of Reed Elsevier PLC (“the Company”)
In our opinion:
§§ the financial statements give a true and fair view of the state of
the Company’s affairs as at 31 December 2014 and of the
consolidated profit and their cash flows for the year then ended;
§§ the consolidated financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
§§ the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice and in accordance with the
provisions of the Companies Act 2006; and
§§ the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the
IAS Regulation.
We have audited the consolidated financial statements which
comprise the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement
of financial position, the consolidated cash flow statement, the
consolidated statement of changes in equity, a summary of the
consolidated accounting policies and the related notes 1 to 17. The
financial reporting framework that has been applied in their
preparation of the consolidated financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union. The parent company financial
statements comprise the parent company balance sheet, the
parent company reconciliation of shareholders’ funds, a summary
of the parent company significant accounting policies and the
related notes 1-3. The financial reporting framework that has
been applied in their preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards.
Our assessment of risks of material misstatement, application
of materiality and overview of the scope of our audit
Given the nature of the Reed Elsevier PLC and Reed Elsevier NV
legal structure, our assessment of risks of material
misstatement, materiality and audit scoping for the Combined
Businesses equally applies to the audit of the parent company and
the consolidated financial statements of Reed Elsevier PLC.
See page 132 for further details.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors. We also comply with
International Standard on Quality Control 1 (UK and Ireland). Our
audit methodology and tools aim to ensure that our quality control
procedures are effective, understood and applied. Our quality
controls and systems include our dedicated professional
standards review team and independent partner reviews.
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we
have formed.
We are required to communicate with the Audit Committee
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We are also required to provide the Audit Committee with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable
related safeguards.
Going Concern
As required by the Listing Rules we have reviewed the directors’
statement contained on page 73 that the Company is a going
concern. We confirm that given the nature of the Reed Elsevier
PLC and Reed Elsevier NV legal structure, our assessment of the
combined businesses’ ability to continue as a going concern
equally applies to the parent company and the consolidated
financial statements of Reed Elsevier PLC.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Company’s
ability to continue as a going concern.
94118_Reed_AR_p160-163.indd 162
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RELX Group Annual Reports and Financial Statements 2014
163
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider
the Annual Report is fair, balanced and understandable and
whether the Annual Report appropriately discloses those matters
that we communicated to the audit committee which we consider
should have been disclosed. We have nothing to report in respect
of these matters.
Graham Richardson (Senior statutory auditor)
For and on behalf of
Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
25 February 2015
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
§§ the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
§§ the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
§§ we have not received all the information and explanations we
require for our audit; or
§§ adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
§§ the parent company financial statements are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in
our opinion certain disclosures of directors’ remuneration have
not been made or the part of the Directors’ Remuneration Report
to be audited is not in agreement with the accounting records and
returns. Under the Listing Rules we are required to review certain
elements of the Directors’ Remuneration Report. We have nothing
to report arising from these matters or our review.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of
the Corporate Governance Statement relating to the Company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under the ISAs (UK and Ireland), we are required to report to you if,
in our opinion, information in the Annual Report is:
§§ materially inconsistent with the information in the audited
financial statements; or
§§ apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Company acquired in
the course of performing our audit; or
§§ is otherwise misleading.
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164 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
5 year summary
Combined financial information
Revenue
Reported operating profit
Adjusted operating profit
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reed Elsevier PLC consolidated financial information
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reported earnings per ordinary share (pence)
Adjusted earnings per ordinary share (pence)
Dividend per ordinary share (pence)
IAS19 (revised)(5)
2014
£m
2013
£m
Note
5,773
1,402
1,739
955
1,213
490
642
43.0p
56.3p
26.0p
6,035
1,376
1,749
1,110
1,197
572
633
48.8p
54.0p
24.6p
1
1
2
3
2
3
4
2012
£m
6,116
1,333
1,688
1,044
1,121
538
593
44.8p
49.4p
23.0p
As reported
2011
£m
6,002
1,205
1,626
760
1,060
389
561
32.4p
46.7p
21.55p
2012
£m
6,116
1,358
1,713
1,069
1,138
552
602
46.0p
50.1p
23.0p
2010
£m
6,055
1,090
1,555
642
983
327
520
27.3p
43.4p
20.4p
(1) Adjusted figures are presented as additional performance measures used by management and are stated before amortisation and
impairment of acquired intangible assets and goodwill, the net financing cost on defined benefit pension schemes, exceptional
restructuring (in 2010 only) and acquisition-related costs, exceptional prior year tax credits (in 2012 only), and in respect of
attributable net profit, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not
expected to crystallise in the near term and includes the benefit of tax amortisation where available on acquired goodwill and
intangible assets. Acquisition-related financing costs and profit and loss from disposal gains and losses and other non-operating
items are also excluded from the adjusted figures.
(2) Reported net profit attributable to shareholders and reported earnings per share are based on the 52.9% share of the Reed Elsevier
combined profit attributable to shareholders, adjusted to equalise the benefit of the UK dividend tax credit with Reed Elsevier NV
shareholders as a reduction in reported profits.
(3) Adjusted net profit attributable to shareholders and adjusted earnings per share are based on the 52.9% share of the Reed Elsevier
combined profit attributable to Reed Elsevier PLC shareholders.
(4) Dividend per ordinary share is based on the interim dividend and proposed final dividend for the relevant year.
(5) Comparative figures for 2012 have been restated following the adoption of IAS19 Employee Benefits (revised).
94118_Reed_AR_p164.indd 164
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RELX Group Annual Reports and Financial Statements 2014
165
Reed Elsevier NV
Annual Report and
Financial Statements
In this section
166 Report of the Board
170 Consolidated financial statements
172 Group accounting policies
173 Notes to the consolidated financial
statements
179 Parent company financial statements
180 Parent company accounting policies
181 Notes to the parent company financial
statements
181 Additional information
182 Independent auditor’s report
184 5 year summary
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166 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Report of the Board
The Non-Executive and Executive Directors present their joint
report, together with the financial statements of the group and of
Reed Elsevier NV, for the year ended 31 December 2014.
As a consequence of the merger of Reed Elsevier NV’s businesses
with those of Reed Elsevier PLC, and the Governing Agreement
regulating the relationship including board composition and
economic interests of the parties, the shareholders of Reed Elsevier
NV and Reed Elsevier PLC can be regarded as having the interests
of a single economic group. The combined financial statements
represent the combined interests of both sets of shareholders and
encompass the businesses of Reed Elsevier Group plc, Elsevier
Reed Finance BV and their subsidiaries, associates and joint
ventures, together with the parent companies, Reed Elsevier NV
and Reed Elsevier PLC (“the combined businesses”).
This report of the Board and the consolidated and parent company
financial statements should be read in conjunction with the
combined financial statements and other reports set out on pages
2 to 145, which are incorporated by reference herein. Summary
combined financial information in euros is set out on pages 136 to
139. The combined financial statements on pages 92 to 95 are to be
considered as part of the notes to the statutory financial
statements. The Annual Report of Reed Elsevier NV within the
meaning of article 2:391 of the Dutch Civil Code consists of pages
165 to 169 and, incorporated by reference, pages 2 to 146. The
Corporate Governance Statement of Reed Elsevier NV dated 25
February 2015 is published on the Reed Elsevier website
(www.relxgroup.com) and is incorporated by reference herein
as per the Vaststellingsbesluit nadere voorschriften inhoud
jaarverslag January 2010 article 2a under 1 sub b.
Effective 25 February 2015, Reed Elsevier NV and Reed Elsevier
PLC transferred their respective ownership interests in Elsevier
Reed Finance BV to Reed Elsevier Group plc and named this newly
combined single group entity RELX Group plc, as part of a
proposed modernisation of the corporate structure. A full
description is set out on pages 66 and 67.
Principal activities
Reed Elsevier NV is a holding company and its principal
investment is its direct 50% shareholding in RELX Group plc,
which is engaged in providing information solutions for
professional customers across industries. The remaining
shareholding in RELX Group plc is held by Reed Elsevier PLC.
Reed Elsevier NV and Reed Elsevier PLC have retained their
separate legal identities and are publicly held companies. Reed
Elsevier NV’s securities are listed in Amsterdam and New York
and Reed Elsevier PLC’s securities are listed in London and
New York.
Financial statement presentation
The consolidated financial statements of Reed Elsevier NV include
the 50% economic interest that its shareholders (including Reed
Elsevier PLC, which has an indirect 5.8% interest in Reed Elsevier
NV) have under the equalisation arrangements in the combined
businesses, accounted for on an equity basis.
Dividends paid to Reed Elsevier NV and Reed Elsevier PLC
shareholders are, other than in special circumstances, equalised
at the gross level inclusive of the UK tax credit available to certain
Reed Elsevier PLC shareholders.
In addition to the reported figures, adjusted profit figures are
presented as additional performance measures used by
management. These exclude in relation to the results of joint
ventures, Reed Elsevier NV’s share of amortisation of acquired
intangible assets, acquisition-related costs, disposal-related and
other non-operating items, the net pension financing charge or
credit, and movements in deferred taxation assets and liabilities
not expected to crystallise in the near term and include the benefit
of tax amortisation where available on acquired goodwill and
intangible assets.
Consolidated income statement
Reed Elsevier NV’s shareholders’ 50% share of the adjusted profit
before tax of the combined businesses was €987m (2013: €928m).
Reported profit before tax, including the Reed Elsevier NV
shareholders’ share of amortisation, acquisition-related costs and
disposals and non-operating items, was €597m (2013: €659m). The
decrease reflects the non-recurring deferred tax credits in 2013.
Elsevier achieved good growth in primary research submissions
and usage, and in databases and tools, across the scientific,
technical and medical segments. At Risk & Business Information;
all business segments achieved strong growth. Legal maintained
positive underlying revenue growth despite subdued market
conditions in the US and Europe. Exhibitions achieved strong
underlying growth and continued to actively pursue growth
opportunities through new launches and small acquisitions.
The overall adjusted operating margin was 1.1 percentage points
higher despite investment in global technology platforms and new
products and services, reflecting a combination of process
innovation, portfolio development and currency effects.
Reed Elsevier NV ’s shareholders’ share of the adjusted profit
attributable to the combined businesses was €752m (2013:
€707m). After deducting Reed Elsevier NV’s share of the post-tax
charge for amortisation of acquired intangible assets, acquisition-
related costs, disposal-related and other non-operating items,
the net financing charge on defined benefit pension schemes and
movements in deferred taxes related to acquired intangible assets
the reported net profit for the year was €592m (2013: €655m).
Adjusted earnings per share increased 8% to €1.07 (2013: €0.99).
At constant rates of exchange, the adjusted earnings per share
were 10% higher. Including amortisation of acquired intangible
assets, acquisition-related costs, disposal-related and other
non-operating items, the net financing charge on defined benefit
pension schemes and tax adjustments, the basic earnings per
share were €0.85 (2013: €0.91).
Consolidated statement of financial position
The consolidated statement of financial position of Reed Elsevier
NV reflects its 50% economic interest in the net assets of the
combined businesses which as at 31 December 2014 was €1,359m
(2013: €1,434m). The €75m decrease in net assets reflects
dividends paid and shares repurchased partially offset by Reed
Elsevier NV’s share in the comprehensive income of the Group.
94118_Reed_AR_p165-169.indd 166
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RELX Group Annual Reports and Financial Statements 2014
167
Parent company financial statements
In accordance with article 2:362(1) of the Dutch Civil Code, the
individual parent company financial statements of Reed Elsevier NV
(presented on pages 179 to 181) are prepared under UK Generally
Accepted Accounting Practice (UK GAAP). The profit attributable to
the shareholders of Reed Elsevier NV was €537m (2013: €199m)
and net assets as at 31 December 2014, principally representing the
investments in Reed Elsevier Group plc and Elsevier Reed Finance
BV under the historical cost method and loans to their subsidiaries,
were €4,441m (2013: €4,579 m). Free reserves as at 31 December
2014 were €4,192m (2013: €4,329m), comprising reserves and
paid-in surplus less shares held in treasury.
Dividends
The Board is recommending an equalised final dividend of €0.438
per ordinary share, up 17% compared with the prior year. This
gives total ordinary dividends for the year of €0.589 (2013: €0.506),
up 16% on 2013. The final dividend will be paid on 22 May 2015.
Dividend cover, based on adjusted earnings per share and the total
interim and proposed final dividends for the year, is 1.8 times.
The Boards of Reed Elsevier NV and Reed Elsevier PLC have
adopted dividend policies in recent years in respect of their
equalised dividends that, subject to currency considerations, grow
dividends broadly in line with adjusted earnings per share whilst
maintaining dividend cover (being the number of times the annual
dividend is covered by the adjusted earnings per share) of at least
two times over the longer term.
The total dividend paid on the ordinary shares in the financial year
was €349m (2013: €321m).
Share capital
During 2014, 3,003,289 ordinary shares in Reed Elsevier NV were
issued as follows:
§§ under convertible debentures at prices between €14.58
and €20.00
§§ under executive share option schemes at prices between
€14.72 and €19.90
Information regarding shares outstanding at 31 December 2014 is
shown in note 12 to the consolidated financial statements.
At 31 December 2014 the total shares held in treasury were
49,279,277. Of these 5,337,782 ordinary shares were held by the
Employee Benefit Trust and 41,298,545 ordinary shares and
264,295 R shares (equivalent to 2,642,950 ordinary shares) were
held by Reed Elsevier NV. At an extraordinary general meeting of
shareholders of Reed Elsevier NV held in October 2014, the
shareholders approved the reduction of the capital of the Reed
Elsevier NV by the cancellation of up to 40 million of its ordinary
shares held in treasury. Following the shareholders’ meeting, the
Board filed a declaration about cancellation of 40 million ordinary
shares with the Trade Register at the Chamber of Commerce on
22 October 2014. The 40 million ordinary shares in Reed Elsevier NV
were subsequently cancelled with effect from 24 December 2014.
Substantial holdings
As at 25 February 2015, based on the public database of and on
notification received from the Netherlands Authority for the
Financial Markets, the company is aware of interests in the capital
and voting rights of the issued share capital of the company of at
least 3% by the following persons or organisations:
§§ FIL Limited
§§ The Bank of New York Mellon Corporation
§§ Reed Elsevier PLC
§§ Black Rock, Inc.
§§ UBS AG
§§ Reed Elsevier NV
Authority to purchase shares
At the 2014 Annual General Meeting, shareholders passed a
resolution delegating the authority to the Board to acquire shares
in Reed Elsevier NV for a period of 18 months from the date of the
Annual General Meeting of Shareholders and therefore up to and
including 22 October 2015, for the maximum amount of 10% of the
issued capital. During the year, 20,403,351 ordinary shares and
additionally 107,901 R shares (equivalent to 1,079,010 ordinary
shares), were purchased under this and the previous delegation of
authority. As at 31 December 2014 there were 49,279,276 ordinary
shares held in treasury, representing 6.7% of the issued ordinary
shares. A further 2,787,800 ordinary shares were purchased
between 2 January 2015 and the date of this report.
A resolution to renew the delegation of the authority is to be put to
the 2015 Annual General Meeting, together with a proposal for
approval of the reduction of Reed Elsevier NV’s capital by
cancellation of accumulated ordinary shares held in treasury.
Corporate Governance
Reed Elsevier NV and Reed Elsevier PLC are subject to various
corporate governance principles and best practice codes, in
particular the Dutch Corporate Governance Code issued in
December 2008 (the Dutch Code) and the UK Corporate Governance
Code issued by the UK Financial Reporting Council (FRC) in
September 2012 (the UK Code). The FRC published a revised UK
Corporate Governance Code in September 2014 (the 2014 Code)
which applies to accounting periods beginning on or after 1 October
2014. Reed Elsevier NV may not apply fully the verbatim language
of the UK Code, but does fully apply the principles and best
practice provisions of the Dutch Code, other than the following for
the reasons explained below:
§§ Best practice provision II.2.5: Executive directors are required
to build up a minimum shareholding and meeting the relevant
shareholding requirement is both a condition of the vesting of
awards as well as a pre-requisite to maintain eligibility to
receive future awards under the multi-year incentives. The
Group uses long term incentive arrangements in the form of
awards of shares which may vest after three years. The intent
of this shareholding policy is to align the interests of senior
executives and shareholders. This intent is in compliance with
the Dutch Code. Shares received on joining the Group in
compensation for benefits forfeited under incentive schemes
from a previous employer are not to be considered as part of
the minimum shareholding in this context.
§§ Best practice provision II.2.8: The Group has arrangements
that are commensurate with local and legal requirements to
ensure a competitive employment offer to its Board Members.
Executive directors have service contracts under English law
that provide for notice periods not exceeding one year. There
are currently no executive directors with employment
agreements under Dutch law. In the event of dismissal, notice
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168 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
is given in accordance with the agreed notice period. The notice
period applicable to the service contracts of executive
directors is 12 months. The payment during the notice period
may be mitigated if the director finds other employment within
this period. The application of this arrangement may fall within
the best practice provision that remuneration in the event of
dismissal may not exceed the fixed component of one year’s
salary. There are no other severance arrangements in place
for the executive directors and none of the service contracts
contain severance pay arrangements. Although the principle
that severance pay should not exceed the fixed component of
one year’s salary is supported, there may be exceptional
circumstances where this maximum would be manifestly
unreasonable that could justify additional compensation on
termination for loss of variable remuneration components. Full
disclosure on remuneration in event of dismissal is provided in
the Directors’ Remuneration Report.
§§ Best practice provisions II.2.13 and II.2.14: In view of their
detailed specificity and complexity and because of the
confidential or potentially commercially sensitive nature of the
information concerned, individual performance targets and
achievements relevant for variable executive remuneration
will only be disclosed in general terms.
§§ Best practice provision II.3.4 and III.6.3: The disclosure of
transactions where directors have a conflict of interest, as
required by these provisions, shall be qualified to the extent
required under applicable rules and laws pertaining to the
disclosure of price sensitive information, confidentiality and
justified aspects of competition.
For further information on the application of the Dutch Code,
see the Corporate Governance Statement of Reed Elsevier NV
published on the website, www.relxgroup.com.
The Board
Since May 2013, Reed Elsevier NV has had a unitary board
comprising both executive and non-executive directors.
The Boards of Reed Elsevier PLC and RELX Group plc are also
unitary boards. It is established board practice at Reed Elsevier NV
that the executive and the non-executive directors meet together.
Significant agreements – change of control
The Governing Agreement between Reed Elsevier NV and Reed
Elsevier PLC states that upon a change of control of Reed Elsevier
NV (for these purposes, the acquisition by a third party of 50% or
more of the issued share capital having voting rights), should there
not be a comparable offer from the offeror for Reed Elsevier PLC,
Reed Elsevier PLC may serve notice upon Reed Elsevier NV
varying certain provisions of the Governing Agreement, including
the governance and the standstill provisions.
There are a number of borrowing agreements including credit
facilities that in the event of a change of control of both Reed
Elsevier NV and Reed Elsevier PLC and, in some cases, a
consequential credit rating downgrade to sub-investment grade
may, at the option of the lenders, require repayment and/or
cancellation as appropriate.
Directors
The following individuals served as directors during the year:
§§ Principle III.7: The remuneration of non-executive directors is
determined by the Board in the context of the board
harmonisation with Reed Elsevier PLC and RELX Group plc,
having regard for the maximum per annum approved by the
general meeting of shareholders.
Non-executive directors
A Habgood (Chairman)
W Hauser
A Hennah
L Hook
§§ Best practice provision IV.1.1: Appointments, suspensions
and removal procedures for executive directors are set out in
the Reed Elsevier NV Corporate Governance Statement 2014.
In order to safeguard the agreed board harmonisation with
the Board of Reed Elsevier PLC, the articles of association of
Reed Elsevier NV provide that a resolution of the General
Shareholders’ Meeting to appoint an executive director
other than in accordance with the proposal of the Board shall
require a majority of at least two thirds of the votes cast if less
than one half of the company’s issued capital is represented
at the meeting. Given the still generally low attendance rate
at shareholders’ meetings in the Netherlands, the Board
believes that this qualified majority requirement is appropriate
for this purpose.
§§ Best practice provision IV.3.1: It is considered impractical
and unnecessary to provide access for shareholders to all
meetings with analysts and all presentations to investors in
real time. Price sensitive and other information relevant to
shareholders is disclosed as required or as appropriate and
made available on the website. Presentations made following
the announcement of the interim and full year results are
simultaneously webcast. Investor seminars are also webcast.
Executive directors
E Engstrom
(Chief Executive Officer)
D Palmer
(Chief Financial Officer,
until 1 September 2014,
resigned 24 September 2014)
N Luff
(Chief Financial Officer,
appointed 1 September 2014)
(Senior Independent Director)
M van Lier Lels
R Polet
L Sanford
B van der Veer
Duncan Palmer stepped down as Chief Financial Officer on
1 September 2014 and left the Group on 24 September 2014.
Following the conclusion of the search process and on the
recommendation of the Nominations Committee, the Boards
selected Nick Luff who joined the Group and was appointed as
Chief Financial Officer on 1 September 2014.
All directors will stand for re-appointment at the Annual General
Meeting in April 2015.
With great sadness we have learnt of the sudden death of
Professor Dolf van den Brink in December 2014. Mr Van den Brink
was Chairman of the Supervisory Board of Elsevier Reed Finance
BV for a period of 8 years until July 2014. Earlier in 2014 he had
decided to stand down as Chairman due to his busy work schedule.
Mr Van den Brink was very committed to the Group and his
expertise and good humour were much appreciated. He was
greatly valued by everyone in the Group who knew and worked
with him.
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RELX Group Annual Reports and Financial Statements 2014
169
Going concern
The Directors, having made appropriate enquiries, consider that
adequate resources exist for the combined businesses to continue in
operational existence for the foreseeable future and that, therefore,
it is appropriate to adopt the going concern basis in preparing the
2014 financial statements. In reaching this conclusion, the
Directors have had due regard to the combined businesses’
financial position as at 31 December 2014, the strong free cash flow
of the combined businesses, the Group’s ability to access capital
markets and the principal risks facing the Group. No material
uncertainties have been identified.
A commentary on the combined businesses’ cash flows, financial
position and liquidity for the year ended 31 December 2014 is set out
in the Chief Financial Officer’s Report on pages 50 to 57. This shows
that, after taking account of available cash resources and
committed bank facilities that back up short term borrowings, all
of the Group’s borrowings that mature within the next two years can
be covered. The Group’s policies on liquidity, capital management
and management of risks relating to interest rate, foreign exchange
and credit exposures are set out on pages 120 to 123. The principal
risks facing the Group are set out on pages 58 to 60.
Auditors
Resolutions for the re-appointment of Deloitte Accountants BV as
auditors of the company and to authorise the Board to determine
their remuneration will be submitted to the forthcoming Annual
General Meeting on 22 April 2015.
Executive directors
E Engstrom
(Chief Executive Officer)
N Luff
(Chief Financial Officer)
Signed by:
Non-executive directors
A Habgood (Chairman)
W Hauser
A Hennah
L Hook
M van Lier Lels
R Polet
L Sanford
B van der Veer
Registered office
Radarweg 29
1043 NX Amsterdam
The Netherlands
Chamber of Commerce Amsterdam
Register file No: 33155037
25 February 2015
Biographical details of the Directors at the date of this report are
given on pages 62 and 63. Details of the remuneration of the
Directors and their interests in the share capital of the company
are provided in the Directors’ Remuneration Report on pages 75
to 88.
Financial statements and accounting records
The financial statements provide a true and fair view of the state of
affairs of Reed Elsevier NV and the Group as of 31 December 2014
and of the profit or loss in 2014. In preparing the financial
statements, the Board ensures that suitable accounting policies,
consistently applied and supported by reasonable judgements and
estimates, have been used and applicable accounting standards
have been followed. The Board is responsible for keeping proper
accounting records, which disclose with reasonable accuracy at
any time the financial position of the company and enable them to
ensure that the financial statements comply with the law. The
Board has general responsibility for taking reasonable steps to
safeguard the assets of the company and to prevent and detect
fraud and other irregularities.
Internal control
As required under sections II.1.4. and II.1.5. of the Dutch Code, the
Audit Committee and the Board have reviewed the effectiveness of
the systems of internal control and risk management during the
last financial year. The objective of these systems is to manage,
rather than eliminate, the risk of failure to achieve business
objectives. Accordingly, they can only provide reasonable, but not
absolute, assurance against material misstatement or loss. The
outcome of this review has been discussed with the external
auditors. The Board confirmed that as regards financial reporting,
the risk management and control systems provide reasonable
assurance against material inaccuracies or loss and have
functioned properly during the financial year.
Directors’ responsibility statement
The Board confirms, to the best of its knowledge, that:
§§ the consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as issued by
the International Accounting Standards Board and as adopted
by the European Union, give a true and fair view of the financial
position and profit or loss of the group; and
§§ the Report of the Board includes a fair review of the
development and performance of the business during the
financial year and the position of the group as at 31 December
2014 together with a description of the principal risks and
uncertainties that it faces.
Neither Reed Elsevier NV nor the directors accept any liability to
any person in relation to the Annual Report except to the extent
that such liability arises under Dutch law.
Disclosure of information to auditors
As part of the process of approving the Reed Elsevier NV 2014
financial statements, the Board has taken steps to ensure that all
relevant information was provided to the Reed Elsevier NV
auditors and, so far as the Board is aware, there is no relevant
audit information of which the Reed Elsevier NV auditors are
unaware of.
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170
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Share of results of joint ventures
Operating profit
Finance income
Profit before tax
Tax expense
Profit attributable to shareholders
Note
2
10
4
5
1
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
•••
Profit attributable to shareholders
Share of joint ventures’ other comprehensive income/(loss) for the year
Total comprehensive income for the year
Earnings per ordinary share
FOR THE YEAR ENDED 31 DECEMBER
Basic earnings per share
Diluted earnings per share
Consolidated statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash used by operations
Interest received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Dividends received from joint ventures
Net cash from investing activities
Cash flows from financing activities
Equity dividends paid
Repurchase of shares
Proceeds on issue of ordinary shares
Decrease in net funding balances due from joint ventures
Net cash used in financing activities
2014
€m
(3)
575
572
25
597
(5)
592
2014
€m
592
29
621
2013
€m
(2)
642
640
19
659
(4)
655
2013
€m
655
(48)
607
Note
7
7
2014
€
0.85
0.84
2013
€
0.91
0.90
Note
9
10
6
9
2014
€m
2013
€m
(3)
26
(3)
20
520
520
(349)
(361)
33
141
(536)
(3)
19
(1)
15
186
186
(321)
(337)
88
370
(200)
Movement in cash and cash equivalents
4
1
94118_Reed_AR_p170-178.indd 170
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RELX Group Annual Reports and Financial Statements 2014
171
Consolidated statement of financial position
AS AT 31 DECEMBER
Non–current assets
Investments in joint ventures
Current assets
Amounts due from joint ventures
Cash and cash equivalents
Total assets
Current liabilities
Payables
Taxation
Total liabilities
Net assets
Capital and reserves
Share capital issued
Paid–in surplus
Shares held in treasury (including in joint ventures)
Translation reserve
Other reserves
Total equity
Note
2014
€m
2013
€m
10,16
1,412
1,488
3
6
9
1,421
6
56
62
1,359
52
2,309
(711)
60
(351)
1,359
4
2
6
1,494
6
54
60
1,434
55
2,276
(881)
(131)
115
1,434
11
12
13
1
Consolidated statement of changes in equity
Balance at 1 January 2013
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of shares
Share of joint ventures’ increase in share based
remuneration reserve (net of tax)
Share of joint ventures’ settlement of share awards by
the employee benefit trust
Equalisation adjustments
Exchange translation differences
Balance at 1 January 2014
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of shares
Cancellation of shares
Share of joint ventures’ increase in share based
remuneration reserve (net of tax)
Share of joint ventures’ settlement of share awards by
the employee benefit trust
Share of joint ventures' acquisition of non-controlling
interest
Equalisation adjustments
Exchange translation differences
Balance at 31 December 2014
Note
6
6
Share
capital
€m
54
–
–
1
–
Paid–in
surplus
€m
2,189
–
–
87
–
Shares held
in treasury
€m
(571)
–
–
–
(337)
Translation
reserves
€m
(42)
(86)
–
–
–
Other
reserves
€m
(228)
693
(321)
–
–
Total
equity
€m
1,402
607
(321)
88
(337)
–
–
–
–
55
–
–
–
–
(3)
–
–
–
–
–
52
–
–
–
29
29
–
–
–
2,276
–
–
33
–
–
–
–
–
–
–
2,309
24
–
3
(881)
–
–
–
(381)
540
–
17
–
–
(6)
(711)
–
–
(3)
(131)
185
–
–
–
–
–
–
–
–
6
60
(24)
(34)
–
115
436
(349)
–
–
(537)
30
(17)
(9)
(20)
–
(351)
–
(34)
–
1,434
621
(349)
33
(381)
–
30
–
(9)
(20)
–
1,359
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172 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Group accounting policies
Basis of preparation
These consolidated financial statements have been prepared
under the historical cost convention in accordance with applicable
accounting standards. They report the consolidated statements of
income, comprehensive income, cash flow, financial position and
changes in equity of Reed Elsevier NV (incorporated and domiciled
in the Netherlands), and have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and as issued by the International Accounting
Standards Board (IASB).
The consolidated financial statements are prepared on a going
concern basis, as explained on page 169. Unless otherwise
indicated, all amounts shown in the financial statements are in
millions of euros.
The combined financial statements presented in pounds sterling
on pages 92 to 95 form an integral part of the notes to Reed
Elsevier NV’s statutory financial statements. The primary
combined financial statements and selected notes are presented
in euros on pages 135 to 145. The accounting policies adopted in
the preparation of the combined financial statements are set out
on pages 96 to 101.
Determination of profit
The Reed Elsevier NV share of the Group’s combined results has
been calculated on the basis of the 50% economic interest of the
Reed Elsevier NV shareholders in the combined businesses,
after taking account of results arising in Reed Elsevier NV and
its subsidiaries.
Because the dividend paid to shareholders by Reed Elsevier NV is
equivalent to the Reed Elsevier PLC dividend plus, other than in
special circumstances, the UK tax credit available to certain
Reed Elsevier PLC shareholders, Reed Elsevier NV normally
distributes a higher proportion of the combined profit attributable
than Reed Elsevier PLC. Reed Elsevier PLC’s share in this
difference in dividend distributions is settled with Reed Elsevier NV
and is credited directly to consolidated reserves under equalisation.
Reed Elsevier NV can pay a nominal dividend on its R shares held by
a subsidiary of Reed Elsevier PLC that is lower than the dividend on
the ordinary shares. Equally, Reed Elsevier NV has the possibility to
receive dividends directly from Dutch affiliates. Reed Elsevier PLC
is compensated by direct dividend payments by RELX Group plc.
The settlements flowing from these arrangements are also taken
directly to consolidated reserves under equalisation.
Investments
Reed Elsevier NV’s 50% economic interest in the net assets of the
combined businesses has been shown on the consolidated
statement of financial position as investments in joint ventures,
net of the assets and liabilities reported as part of Reed Elsevier
NV and its subsidiaries. Investments in joint ventures are
accounted for using the equity method.
Foreign exchange translation
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the transaction. At each statement
of financial position date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rate
prevailing on the statement of financial position date. Exchange
differences arising are recorded in the income statement. The gains
or losses relating to the retranslation of Reed Elsevier NV’s 50%
interest in the net assets of the combined businesses are classified
as equity and transferred to the translation reserve. When foreign
operations are disposed of, the related cumulative translation
differences are recognised within the income statement in the period.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
which is recognised, in the same or a different period, outside profit
or loss (either in other comprehensive income, directly in equity, or
through a business combination) in which case the tax appears in
the same statement as the transaction that gave rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not recognised
on temporary differences that arise from goodwill which is not
deductible for tax purposes. Deferred tax assets are recognised to
the extent it is probable that taxable profits will be available against
which the deductible temporary differences can be utilised; and
reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets and
liabilities acquired other than in a business combination. Deferred
tax is not discounted.
Critical judgements and key sources of estimation uncertainty
Critical judgements in the preparation of the combined financial
statements are set out on pages 99 to 100.
Standards and amendments effective for the year
The interpretations and amendments to IFRS effective for 2014
have not had a significant impact on the Group’s accounting
policies or reporting.
Standards, amendments and interpretations not yet effective
Recently issued standards, amendments and interpretations and
their impact on future accounting policies and reporting have been
considered on page 101 of the combined financial statements.
94118_Reed_AR_p170-178.indd 172
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RELX Group Annual Reports and Financial Statements 2014
173
Notes to the consolidated financial statements
for the year ended 31 December 2014
1 Basis of preparation
The consolidated financial statements of Reed Elsevier NV reflect the 50% economic interest that its shareholders have under the
equalisation arrangements in the combined businesses, accounted for on an equity basis.
The combined financial statements are presented in pounds sterling, which is the functional currency of the Group. The following
analysis presents how the consolidated financial statements of Reed Elsevier NV, presented in euros, are derived from the combined
financial statements.
REED ELSEVIER NV CONSOLIDATED PROFIT ATTRIBUTABLE TO SHAREHOLDERS
Combined businesses net profit attributable to parent company shareholders in pounds sterling
Combined businesses net profit attributable to parent company shareholders in pounds sterling
translated into euros at average exchange rates
Reed Elsevier NV’s 50% share of combined net profit attributable to shareholders
REED ELSEVIER NV CONSOLIDATED TOTAL EQUITY
Combined shareholders’ equity in pounds sterling
Combined shareholders’ equity in pounds sterling translated into euros at year-end exchange rates
Reed Elsevier NV’s 50% share of combined equity
2014
2013
£955m £1,110m
€1,184m €1,310m
€655m
€592m
2014
2013
£2,106m £2,390m
€2,717m €2,868m
€1,359m €1,434m
2 Administrative expenses
Administrative expenses include the remuneration for present and former Directors of Reed Elsevier NV in respect of services rendered
to Reed Elsevier NV and the combined businesses. Fees for Non–Executive Directors of Reed Elsevier NV of €0.3m (2013: €0.3m) are
included in remuneration. Insofar as remuneration is related to services rendered during 2014 to Reed Elsevier Group plc and Elsevier
Reed Finance BV group, it was borne by these groups. Reed Elsevier NV has no employees (2013: nil).
3 Auditor’s remuneration
Audit fees payable by Reed Elsevier NV were €130,000 (2013: €129,000). Further information on the audit and non-audit fees paid by the
combined businesses to Deloitte Accountants BV and its associates is set out in note 3 to the combined financial statements.
4 Finance income
Finance income from joint ventures
5 Taxation
2014
€m
25
2013
€m
19
A reconciliation of the notional tax charge based on the applicable rate of tax to the actual total tax expense is set out below:
Profit before tax
Tax at applicable rate: 25% (2013: 25%)
Tax at applicable rate on share of results of joint ventures
Tax expense
2014
€m
597
(149)
144
(5)
2013
€m
659
(165)
161
(4)
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174
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2014
6 Equity dividends
ORDINARY DIVIDENDS DECLARED AND PAID IN THE YEAR
Ordinary shares:
Final for prior financial year
Interim for financial year
Total
R shares
2014
€
2013
€
€0.374
€0.151
€0.525
–
€0.337
€0.132
€0.469
–
2014
€m
249
100
349
–
2013
€m
230
91
321
–
The Board of Reed Elsevier NV has proposed a final dividend of €0.438 (2013: €0.374). The cost of funding the proposed final dividend is
expected to be €287m. No liability has been recognised at the statement of financial position date.
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Ordinary shares:
Interim (paid)
Final (proposed)
Total
R shares
•••
7 Earnings per ordinary share (“EPS”)
2014
€
2013
€
€0.151
€0.438
€0.589
–
€0.132
€0.374
€0.506
–
Basic earnings per share
Diluted earnings per share
2014
2013
Weighted
average
number of
shares
(millions)
700.1
708.3
Earnings
€m
592
592
EPS
€
0.85
0.84
Weighted
average
number of
shares
(millions)
717.6
726.9
Earnings
€m
655
655
EPS
€
0.91
0.90
The weighted average number of shares reflects the equivalent ordinary shares amount taking into account the R shares and is after
deducting shares held in treasury. R shares in the company are held by a subsidiary of Reed Elsevier PLC and represent a 5.8% interest
in Reed Elsevier NV’s share capital.
The diluted EPS figures are calculated after taking account of the effect of potential additional ordinary shares arising from share
options and conditional shares.
Movements in the number of ordinary shares or equivalents for the year ended 31 December 2014 are shown in note 12.
8 Adjusted figures
Adjusted profit and earnings per share figures are used by management as additional performance measures. The adjusted figures are
derived as follows:
Reported figures
Share of adjustments in joint ventures:
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Adjusted figures
Profit attributable to
shareholders
Basic earnings
per share
2014
€m
592
174
13
7
8
(42)
752
2013
€m
655
192
18
8
11
(177)
707
2014
€
0.85
0.24
0.02
0.01
0.01
(0.06)
1.07
2013
€
0.91
0.27
0.03
0.01
0.02
(0.25)
0.99
* Movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
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RELX Group Annual Reports and Financial Statements 2014
9 Statement of cash flows
RECONCILIATION OF ADMINISTRATIVE EXPENSES TO CASH USED BY OPERATIONS
Administrative expenses
Movement in payables
Cash used by operations
RECONCILIATION OF NET FUNDING BALANCES DUE FROM JOINT VENTURES
At start of year
Cash flow
At end of year
10 Investments in joint ventures
Share of results of joint ventures
Share of joint ventures’ other comprehensive gain/(loss)
Share of joint ventures’ acquisition of non–controlling interests
Share of joint ventures’ increase in share based remuneration reserve (net of tax)
Share of joint ventures’ purchase of treasury shares by employee benefit trust
Equalisation adjustments
Dividends received from joint ventures
Decrease in net funding balances due from joint ventures
Net movement in the year
At start of year
At end of year
175
2013
€m
(2)
(1)
(3)
2013
€m
1,397
(370)
1,027
2013
€m
642
(48)
–
29
–
(34)
(186)
(370)
33
1,455
1,488
2014
€m
(3)
–
(3)
2014
€m
1,027
(141)
886
2014
€m
575
29
(9)
30
(20)
(20)
(520)
(141)
(76)
1,488
1,412
During the year Reed Elsevier NV received dividends of €300m from Reed Elsevier Overseas BV and €220m from Elsevier Reed Finance BV.
Summarised information showing total amounts in respect of joint ventures and Reed Elsevier NV shareholders’ 50% share is set out below:
Revenue
Net profit for the year
Total joint ventures
Reed Elsevier NV
shareholders’ share
2014
€m
7,159
1,190
2013
€m
7,121
1,316
2014
€m
3,580
575
2013
€m
3,561
642
Reed Elsevier NV’s share of joint ventures’ net profit attributable to parent company shareholders for the year excludes the net profit
that arose directly in Reed Elsevier NV of €17m (2013: €13m).
Reed Elsevier NV’s other comprehensive income includes an income of €29m (2013: €48m loss) relating to joint ventures.
Total assets
Total liabilities
Net assets
Attributable to:
Joint ventures
Non–controlling interests
Net funding balances due from joint ventures
Total
Total joint ventures
2014
€m
14,302
(11,545)
2,757
2013
€m
12,594
(9,686)
2,908
2,717
40
2,868
40
2,757
2,908
Reed Elsevier NV
shareholders’ share
2014
€m
7,145
(6,619)
526
526
–
526
886
1412
2013
€m
6,295
(5,834)
461
461
–
461
1,027
1,488
The above amounts for Reed Elsevier NV’s shareholders share of total assets and total liabilities exclude assets and liabilities held by
Reed Elsevier NV, but include the counterparty balances of amounts owed to and by other Group businesses. Included within Reed
Elsevier NV’s share of assets and liabilities are cash and cash equivalents of €172m (2013: €77m) and borrowings of €2,467m
(2013: €1,963m) respectively.
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176 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2014
11 Payables
Included within payables are RELX Group employee convertible debenture loans of €4m (2013: €5m) with a weighted average
interest rate of 1.65% (2013: 1.95%). Depending on the conversion terms, the surrender of €200 par value debenture loans qualifies
for 50 Reed Elsevier NV ordinary shares.
12 Share capital and shares held in treasury
AUTHORISED
Ordinary shares of €0.07 each
R shares of €0.70 each
Total
ISSUED AND FULLY PAID
At 1 January 2013
Issue of ordinary shares
At 1 January 2014
Issue of ordinary shares
Cancellation of shares
At 31 December 2014
No. of shares
1,800,000,000
26,000,000
R shares
number
4,303,179
–
4,303,179
–
–
4,303,179
Ordinary
shares
number
725,984,225
8,165,731
734,149,956
3,003,289
(40,000,000)
697,153,245
R shares
€m
3
–
Ordinary
shares
€m
51
1
3
–
–
3
52
–
(3)
49
€m
126
18
144
Total
€m
54
1
55
–
(3)
52
The issue of shares relates to the exercise of share options. Details of share option and conditional share schemes are set out in note 6 to
the combined financial statements.
TOTAL ORDINARY SHARES OR EQUIVALENTS
Year ended 31 December
Ordinary shares at start of year
Issue of ordinary shares
Repurchase of ordinary shares
Cancellation of shares
Net (purchase)/release of ordinary shares by the employee benefit trust
Ordinary shares at end of year
R share equivalents at start of year
Repurchase of R share equivalents
R share equivalents at end of year
Total ordinary share equivalents at end of year
Weighted average number of ordinary share equivalents during the year
*ordinary share equivalents.
Ordinary
shares
in issue
(millions)
734.1
3.0
–
(40.0)
–
697.1
–
–
–
697.1
R shares
in issue*
(millions)
–
–
–
–
–
–
43.0
–
43.0
43.0
Treasury
shares
(millions)
(65.9)
–
(20.4)
40.0
(0.3)
(46.6)
(1.5)
(1.1)
(2.6)
(49.2)
2014
Ordinary
shares or
equivalents
net of
treasury
shares
(millions)
668.2
3.0
(20.4)
–
(0.3)
650.5
41.5
(1.1)
40.4
690.9
700.1
2013
Ordinary
shares or
equivalents
net of
treasury
shares
(millions)
682.4
8.1
(24.3)
–
2.0
668.2
42.4
(0.9)
41.5
709.7
717.6
At 31 December 2014, 4,038,884 R shares (2013: 4,146,785) were held by a subsidiary of Reed Elsevier PLC. The R shares are convertible
at the election of the holders into ten ordinary shares each and each R share carries an entitlement to cast ten votes. They have
otherwise the same rights as the ordinary shares, except that Reed Elsevier NV may pay a lower dividend on the R shares.
At 31 December 2014 shares held in treasury comprised 41,298,545 ordinary shares and 264,295 R shares (equivalent to 2,642,950
ordinary shares). In addition, 5,337,782 ordinary shares were held by the Employee Benefit Trust. At an extraordinary general meeting
of shareholders of Reed Elsevier NV held in October 2014, the shareholders approved the reduction of the capital of Reed Elsevier NV
by the cancellation of up to 40,000,000 of its ordinary shares held in treasury. Following the shareholders’ meeting, the Board filed a
declaration for the cancellation of 40,000,000 ordinary shares with the Trade Register at the Chamber of Commerce on 22 October 2014.
The 40,000,000 ordinary shares of Reed Elsevier NV were subsequently cancelled with effect from 24 December 2014.
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RELX Group Annual Reports and Financial Statements 2014
177
13 Other reserves
At start of year
Profit attributable to shareholders
Cancellation of shares
Share of joint ventures’:
Actuarial (losses)/gains on defined benefit pension schemes
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Acquisition of non-controlling interest
Equalisation adjustments
Equity dividends paid
At end of year
14 Contingent liabilities
There are contingent liabilities in respect of borrowings of joint ventures guaranteed by Reed Elsevier NV as follows:
Guaranteed jointly and severally with Reed Elsevier PLC
2014
€m
115
592
(537)
(165)
(50)
12
47
30
(17)
(9)
(20)
(349)
(351)
2013
€m
(228)
655
–
24
38
(2)
(22)
29
(24)
–
(34)
(321)
115
2014
€m
4,653
2013
€m
3,676
Financial instruments disclosures in respect of the borrowings covered by the above guarantees are given in note 18 to the combined
financial statements.
15 Related party transactions
All transactions with joint ventures and RELX Group employees, which are related parties of Reed Elsevier NV, are reflected in these
financial statements. Key management personnel are also related parties and comprise the Directors of Reed Elsevier NV. Transactions
with key management personnel are set out in note 2 and in note 28 to the combined financial statements.
16 Principal joint ventures as at 31 December 2014
Reed Elsevier Group plc
Incorporated and operating in Great Britain
1–3 Strand
London WC2N 5JR
During 2014 was a holding company for operating businesses
involved in science & medical, risk management, legal and
business publishing and organisation of trade exhibitions
Elsevier Reed Finance BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, the Netherlands
During 2014 was a holding company for financing businesses
18,385 ordinary R shares
18,385 ordinary E shares
100,000 7.5% cumulative preference non voting shares
Equivalent to a 50% equity interest
133 ordinary R shares
205 ordinary E shares
Equivalent to a 61% equity interest
% holding
–
100%
–
–
100%
As at 31 December 2014, the R shares in Reed Elsevier Group plc and Elsevier Reed Finance BV and the non–voting preference shares in
Reed Elsevier Group plc were owned by Reed Elsevier PLC. In addition, Reed Elsevier NV holds shares with special dividend rights in
Reed Elsevier Overseas BV, a subsidiary of Reed Elsevier Group plc with registered offices in Amsterdam. These shares are included in
the amount shown under investments in joint ventures and enable Reed Elsevier NV to receive dividends from companies within the
same tax jurisdiction.
A list of companies within the Group is filed with the Amsterdam Chamber of Commerce in the Netherlands.
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178 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2014
17 Events after the balance sheet date
Effective 25 February 2015, Reed Elsevier NV transferred interest bearing receivables of €836m to Elsevier Reed Finance BV for
consideration of 1 ordinary voting E share. Subsequently, on 25 February 2015, Reed Elsevier NV transferred its direct ownership
interest in Elsevier Reed Finance BV to its jointly-owned company Reed Elsevier Group plc, for consideration of 31,613 ordinary voting
shares in Reed Elsevier Group plc. Simultaneously, Reed Elsevier PLC transferred its direct ownership interest in Elsevier Reed
Finance BV to Reed Elsevier Group plc, for consideration of 31,613 ordinary voting shares in Reed Elsevier Group plc. This newly
combined single group entity was named RELX Group plc. The R shares and E shares of RELX Group plc held by Reed Elsevier PLC
and Reed Elsevier NV respectively were converted into non-voting shares.
Reed Elsevier NV has retained its 50% economic interest in the combined businesses, and no gains or losses were recorded on the
transactions. As Reed Elsevier NV and Reed Elsevier PLC each hold 50% of the voting shares in issue, joint control of RELX Group plc has
been retained and their respective interests will continue to be accounted for under the equity method, as described in the accounting
policies on page 172.
18 Approval of financial statements
The consolidated financial statements were signed and authorised for issue by the Board of Directors on 25 February 2015.
A J Habgood
Chairman of the Board
N L Luff
Chief Financial Officer
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RELX Group Annual Reports and Financial Statements 2014
179
Parent company profit and loss account
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Dividends received from joint ventures
Finance income from joint ventures
Tax expense
Profit attributable to ordinary shareholders
Parent company balance sheet
AS AT 31 DECEMBER
Fixed assets
Investments in joint ventures
Current assets
Amounts due from joint ventures – funding
Amounts due from joint ventures – other
Cash
Creditors: amounts falling due within one year
Taxation
Other creditors
Net current assets
Net assets
Capital and reserves
Share capital issued
Paid-in surplus
Shares held in treasury
Other reserves
Reserves
Shareholders’ funds
Note
2
2014
€m
(3)
520
25
(5)
537
2013
€m
(2)
186
19
(4)
199
Note
2014
€m
2013
€m
3
3
3
1
2
3,608
3,606
886
3
889
6
895
56
6
62
833
4,441
52
2,309
(635)
197
2,518
4,441
1,027
4
1,031
2
1,033
54
6
60
973
4,579
55
2,276
(814)
195
2,867
4,579
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180 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Parent company reconciliation of shareholders’ funds
At 1 January 2013
Profit attributable to shareholders
Equity dividends paid
Repurchase of shares
Issue of shares, net of expenses
Equity instruments granted to employees of combined businesses
At 1 January 2014
Profit attributable to shareholders
Equity dividends paid
Repurchase of shares
Cancellation of shares
Issue of shares, net of expenses
Equity instruments granted to employees of combined businesses
At 31 December 2014
Share
capital
issued
€m
Paid-in
surplus (i)
€m
Shares
held in
treasury
€m
Other
reserves (ii)
€m
Reserves
(iii)
€m
54
–
–
–
1
–
55
–
–
–
(3)
–
–
52
2,189
–
–
–
87
–
2,276
–
–
–
–
33
–
2,309
(477)
–
–
(337)
–
–
(814)
–
–
(361)
540
–
–
(635)
193
–
–
–
–
2
195
–
–
–
–
–
2
197
2,989
199
(321)
–
–
–
2,867
537
(349)
–
(537)
–
–
2,518
Total
€m
4,948
199
(321)
(337)
88
2
4,579
537
(349)
(361)
–
33
2
4,441
(i) Within paid–in surplus, an amount of €2,132m (2013: €2,099m) is free of tax.
(ii)
Other reserves relate to equity instruments granted to employees of the combined businesses under share based remuneration
arrangements. Other reserves do not form part of free reserves.
(iii) Free reserves of the company at 31 December 2014 were €4,192m (2013: €4,329m), comprising reserves and paid–in surplus less
shares held in treasury.
Parent company accounting policies
Basis of preparation
The parent company financial statements have been prepared
under the historical cost convention. As permitted by 2:362
subsection 1 of the Dutch Civil Code for companies with
international operations, the parent company financial statements
have been prepared in accordance with UK Generally Accepted
Accounting Practice (UK GAAP). Unless otherwise stated the
financial statements are in millions of euro.
The parent company financial statements and notes should be
read in conjunction with the consolidated financial statements
presented on pages 170 to 178.
The parent company financial statements are prepared on a going
concern basis, as explained on page 169.
The Reed Elsevier NV accounting policies under UK GAAP are set
out below.
Investments
Fixed asset investments are stated at cost, less provision, if
appropriate, for any impairment in value. The fair value of the
award of share options and conditional shares over Reed Elsevier
NV ordinary shares to employees of the combined businesses are
treated as a capital contribution.
Other assets and liabilities are stated at historical cost, less
provision, if appropriate, for any impairment in value.
Shares held in treasury
The amount of consideration paid, including directly attributable
costs, for shares repurchased is recognised as shares held in
treasury and presented as a deduction from total equity. Details of
share capital and shares held in treasury are set out in note 12 of
the Reed Elsevier NV consolidated financial statements and note
26 of the combined financial statements.
Foreign exchange translation
Transactions entered into in foreign currencies are recorded at
the exchange rates applicable at the time of the transaction.
Taxation
Deferred taxation is provided in full for timing differences using
the liability method. Deferred tax assets are only recognised to the
extent that they are considered recoverable in the short term.
Deferred taxation balances are not discounted.
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RELX Group Annual Reports and Financial Statements 2014
181
Notes to the parent company financial statements
1 Other creditors
Other creditors include €4m (2013: €5m) of RELX Group employee convertible debenture loans with a weighted average interest rate of
1.65% (2013: 1.95%). Depending on the conversion terms, the surrender of €200 par value debenture loans qualifies for 50 Reed Elsevier
NV ordinary shares.
2 Reconciliations to consolidated financial statements
A reconciliation of the parent company profit attributable to ordinary shareholders prepared under UK GAAP and the consolidated profit
attributable to ordinary shareholders prepared under IFRS and presented under the equity method is provided below:
YEAR ENDED 31 DECEMBER
Parent company profit attributable to shareholders
Share of results of joint ventures
Dividends received from joint ventures
Consolidated profit attributable to shareholders using the equity method
2014
€m
537
575
(520)
592
2013
€m
199
642
(186)
655
A reconciliation between the parent company shareholders’ funds prepared under UK GAAP and the consolidated shareholders’ funds
prepared under IFRS and presented under the equity method is provided below:
AS AT 31 DECEMBER
Parent company shareholders’ funds
Cumulative share of results of joint ventures less cumulative dividends received from joint ventures
Cumulative currency translation adjustments
Cumulative equalisation and other adjustments
Share of treasury shares held by joint ventures’ employee benefit trust
Share of IFRS adjustments in joint ventures
Equity instruments granted to employees of combined businesses
Consolidated shareholders’ funds using the equity method
2014
€m
4,441
(1,916)
(160)
(131)
(76)
(602)
(197)
1,359
2013
€m
4,579
(1,971)
(351)
41
(67)
(602)
(195)
1,434
3 Related party transactions
All transactions with joint ventures and RELX Group employees which are related parties of Reed Elsevier NV, are reflected in these
financial statements. Principal joint ventures are set our in note 16 of the Reed Elsevier NV consolidated financial statements.
Investments in joint ventures include equity instruments granted to Group employees of €2m (2013: €2m). Transactions with key
management personnel including share based remuneration costs are set out in note 28 to the combined financial statements and
details of the directors’ remuneration are included in the Directors’ Remuneration Report on pages 75 to 88.
4 Events after the balance sheet date
Effective 25 February 2015, Reed Elsevier NV transferred interest bearing receivables of €836m to Elsevier Reed Finance BV for
consideration of 1 ordinary voting share. Subsequently, Reed Elsevier NV transferred its direct 61% ownership interest in Elsevier Reed
Finance BV to its jointly-owned company Reed Elsevier Group plc, for consideration of 31,613 ordinary voting shares in Reed Elsevier
Group plc and this newly combined single group entity was named RELX Group plc. Reed Elsevier NV has retained its 50% economic
interest in the combined businesses, and no gains or losses were recorded on the transactions. Further details are provided on page 66.
5 Approval of financial statements
The consolidated financial statements were signed and authorised for issue by the Board of Directors on 25 February 2015.
A J Habgood
Chairman of the Board
N L Luff
Chief Financial Officer
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182 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Additional information (unaudited)
R shares
Reed Elsevier NV has two types of shares: ordinary shares of €0.07 nominal value and R shares of €0.70 nominal value. Each R share is
convertible into 10 ordinary shares and is entitled to cast 10 votes. Otherwise it has the same rights as an ordinary share, except that
Reed Elsevier NV may pay a lower dividend on it, but not less than 1% of the nominal value of an R share.
Profit allocation
The Articles of Association provide that distributions of dividend may only be made insofar as the company’s equity exceeds the amount of
the paid-in capital, increased by the reserves which must be kept by virtue of the law and may be made in cash or in shares, at the proposal
of the Board. Distribution of dividends on ordinary shares and on the class R shares shall be made in proportion to the nominal value of each
share. The Board may resolve that the dividend to be paid on each class R share shall be lower than the dividend to be paid on each ordinary
share, resolving at the same time what amount of dividend shall be paid on each ordinary share and each class R share, respectively.
OVERVIEW OF PROFIT FOR THE YEAR AND DIVIDENDS PAID
Final dividend on ordinary shares for prior financial year
Interim dividend on ordinary shares for financial year
Dividend on R shares
Surplus/(deficit) for the year
Total
2014
€m
249
100
–
188
537
2013
€m
230
91
–
(122)
199
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RELX Group Annual Reports and Financial Statements 2014
183
Independent auditor’s report on financial statements
to the shareholders of Reed Elsevier NV
Opinion on our audit of the consolidated and parent company
financial statements of Reed Elsevier NV (“the Company”)
We have audited the accompanying 2014 financial statements of
Reed Elsevier NV, based in Amsterdam. The financial statements
include the consolidated financial statements and the company
financial statements.
In our opinion:
§§ the consolidated financial statements give a true and fair view
of the financial position of Reed Elsevier NV as at December 31,
2014 and of its results and its cash flows in the year 2014 in
accordance with International Financial Reporting Standards
as adopted by the European Union (EU-IFRS) and with Part 9 of
Book 2 of the Dutch Civil Code.
§§ the parent company financial statements give a true and fair
view of the financial position of Reed Elsevier N.V.as at
December 31, 2014 and of its result for the year 2014 in
accordance with United Kingdom Generally Accepted
Accounting Practice and in accordance with Part 9 of Book 2 of
the Dutch Civil Code.
The consolidated financial statements comprise:
1.
2.
the consolidated statement of financial position as at
December 31, 2014;
the following statements for 2014: consolidated income
statements, consolidated statement of comprehensive
income, consolidated statement of cashflows and consolidated
statement of changes in equity; and
3.
the related notes 1 to 18, including a summary of the significant
accounting policies and other explanatory information.
The company financial statements comprise:
1.
2.
3.
4.
the parent company profit and loss account for the year 2014;
the parent company balance sheet as at December 31, 2014;
the parent reconciliation of shareholders’ funds; and
notes comprising a summary of the significant accounting
policies and other explanatory information and the related
notes 1 to 5.
Basis for Our Opinion
We conducted our audit in accordance with Dutch law, including
the Dutch Standards on Auditing. Our responsibilities under those
standards are further described in the “Our responsibilities for the
audit of the financial statements” section of our report.
We are independent of the Company in accordance with the
Verordening inzake de onafhankelijkheid van accountants bij
assurance-opdrachten (ViO) and other relevant independence
regulations in the Netherlands. Furthermore we have complied
with the Verordening gedrags- en beroepsregels accountants
(VGBA).
We believe the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those that, in our professional judgment,
were of most significance in our audit of the consolidated and
parent company financial statements. We have communicated
these key audit matters to the Audit Committees; the Audit
Committees’ consideration of these risks is set out on page 89. The
key audit matters are not a comprehensive reflection of all
matters discussed. Our audit procedures relating to these
matters were addressed in the context of our audit of the
consolidated and parent company financial statements as a whole
and in forming our opinion thereon, and we do not provide a
separate opinion on these individual matters. Given the nature of
the Reed Elsevier PLC and Reed Elsevier NV legal structure, the
key audit matters, our assessed risks of material misstatement,
application of materiality, overview of the scope of our group audit,
and considerations regarding going concern for the combined
business equally applies to the audit of the consolidated and
parent company financial statements of Reed Elsevier NV. See
page 132 for further details.
Responsibilities of Executive Directors and the Non-Executive
Directors for the Financial Statements
Executive directors are responsible for the preparation and fair
presentation of the financial statements in accordance with
EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code, and for the
preparation of the report of the board in accordance with Part 9 of
Book 2 of the Dutch Civil Code. Furthermore, executive directors
are responsible for such internal control as executive directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
As part of the presentation of the financial statements, executive
directors are responsible for assessing the company’s ability to
continue as a going concern. Based on the financial reporting
frameworks mentioned, executive directors should prepare the
financial statements using the going concern basis of accounting
unless executive directors either intend to liquidate the company
or to cease operations, or have no realistic alternative but to do so.
Executive directors should disclose events and circumstances
that may cast significant doubt on the company’s ability to continue
as a going concern.
The non executive directors are responsible for overseeing the
company’s financial reporting process.
Our responsibility for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a
manner that allows us to obtain sufficient and appropriate audit
evidence for our opinion.
Our audit has been performed with a high, but not absolute, level
of assurance, which means we may not have detected all errors
and fraud.
We have exercised professional judgment and have maintained
professional scepticism throughout the audit, in accordance with
Dutch Standards on Auditing, ethical requirements and
independence requirements.
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184 FINANCIAL STATEMENTS AND OTHER INFORMATION
INDEPENDENT AUDITOR’S REPORT
Our audit included:
Report on Other Legal and Regulatory Requirements
§§ identifying and assessing the risks of material misstatement of
the financial statements, whether due to fraud or error,
designing and performing audit procedures responsive to
those risks, and obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
§§ obtaining an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control.
Report of the Board and the Other Information
Pursuant to legal requirements of Part 9 of Book 2 of the Dutch
Civil Code (concerning our obligation to report about the report of
the board and other data), we declare that:
§§ we have no deficiencies to report as a result of our examination
whether the report of the board, to the extent we can assess,
has been prepared in accordance with Part 9 of Book 2 of the
Dutch Civil Code, and whether the information as required of
Part 9 of Book 2 of the Dutch Civil Code has been annexed.
§§ further we report that the report of the board report,
to the extent we can assess, is consistent with the
financial statements.
§§ evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related
disclosures made by management.
§§ concluding on the appropriateness of management’s use of the
Engagement
We were engaged by the Audit Committee as auditor of RELX
Group plc and as auditor of Reed Elsevier NV on 23 July 2014, for
the audit of the financial year ended 31 December 2014 and have
operated as statutory auditor since 1994.
Deloitte Accountants BV
M.J. van der Vegte
Amsterdam
The Netherlands
25 February 2015
going concern basis of accounting, and based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt
on the company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the
company to cease to continue as a going concern.
§§ evaluating the overall presentation, structure and content of
the financial statements, including the disclosures; and
§§ evaluating whether the financial statements represent the
underlying transactions and events in a manner that achieves
fair presentation.
We communicate with the non executive directors regarding,
among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant findings in
internal control that we identify during our audit.
We provide the non executive directors with a statement that we
have complied with relevant ethical requirements regarding
independence and communicated with them all relationships and
other matters that may reasonably be thought to bear on our
independence, including where applicable, related safeguards.
From the matters communicated with the non executive directors
we determine those matters that were of most significance in the
audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, not communicating the matter is in the
public interest.
94118_Reed_AR_p179-184.indd 184
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RELX Group Annual Reports and Financial Statements 2014
185
5 year summary
Combined financial information
Revenue
Reported operating profit
Adjusted operating profit
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reed Elsevier NV consolidated financial information
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reported earnings per ordinary share (€)
Adjusted earnings per ordinary share (€)
Dividend per ordinary share (€)
IAS19 (revised)(3)
2014
€m
2013
€m
Note
7,159
1,738
2,156
1,184
1,504
592
752
€0.85
€1.07
€0.589
7,121
1,624
2,064
1,310
1,413
655
707
€0.91
€0.99
€0.506
1
1
2
2012
€m
7,523
1,639
2,076
1,284
1,379
642
689
€0.87
€0.94
€0.467
As reported
2012
€m
2011
€m
2010
€m
7,523
1,670
2,107
1,315
1,400
658
700
€0.90
€0.95
€0.467
6,902
1,386
1,870
874
1,219
437
610
€0.59
€0.83
€0.436
7,084
1,275
1,819
751
1,150
376
575
€0.51
€0.78
€0.412
(1) Adjusted figures are presented as additional performance measures used by management and are stated before amortisation and
impairment of acquired intangible assets and goodwill, the net financing cost on defined benefit pension schemes, exceptional
restructuring (in 2010 only) and acquisition-related costs, exceptional prior year tax credits (in 2012 only), and in respect of
attributable net profit, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not
expected to crystallise in the near term and includes the benefit of tax amortisation where available on acquired goodwill and
intangible assets. Acquisition-related financing costs and profit and loss from disposal gains and losses and other non-operating
items are also excluded from the adjusted figures.
(2) Dividend per ordinary share is based on the interim dividend and proposed final dividend for the relevant year.
(3) Comparative figures for 2012 have been restated following the adoption of IAS19 Employee Benefits (revised).
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186 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
94118_Reed_AR_p186-190.indd 186
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RELX Group Annual Reports and Financial Statements 2014
187
Other financial
information
In this section
Additional information for US Investors
188 Reed Elsevier combined businesses
189 Reed Elsevier PLC
190 Reed Elsevier NV
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188 FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
REED ELSEVIER COMBINED BUSINESSES
Reed Elsevier combined businesses
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the combined financial statements into US dollars at the stated rates of
exchange. The financial information provided below is prepared under IFRS as used in the preparation of the combined financial
statements. It does not represent a restatement under US GAAP which would be different in some significant respects.
EXCHANGE RATES FOR TRANSLATION
US dollars to sterling
Income statement
Statement of financial
position
2014
1.65
2013
1.56
2014
1.56
2013
1.66
Combined income statement
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Operating profit
Profit before tax
Net profit attributable to parent companies’ shareholders
Adjusted operating profit
Adjusted profit before tax
Adjusted net profit attributable to parent companies’ shareholders
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Increase/(decrease) in cash and cash equivalents
Movement in cash and cash equivalents
At start of year
Increase/(decrease) in cash and cash equivalents
Exchange translation differences
At end of year
Adjusted cash flow
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Current assets
Assets held for sale
Total assets
Current liabilities
Non-current liabilities
Liabilities associated with assets held for sale
Total liabilities
Net assets
2014
US$m
9,525
2,313
2,028
1,576
2,869
2,627
2,001
Restated
2013
US$m
9,415
2,147
1,866
1,732
2,728
2,452
1,867
2014
US$m
2,272
(932)
(1,106)
234
219
234
(22)
431
2,742
2014
US$m
14,276
3,020
–
17,296
6,140
7,819
3
13,962
3,334
2013
US$m
2,162
(493)
(2,499)
(830)
1,038
(830)
11
219
2,657
2013
US$m
14,376
3,011
35
17,422
6,395
7,000
5
13,400
4,022
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RELX Group Annual Reports and Financial Statements 2014
189
Reed Elsevier PLC
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the Reed Elsevier PLC consolidated financial statements into US dollars at
the stated rates of exchange. The financial information provided below is prepared under IFRS as used in the preparation of the Reed
Elsevier PLC consolidated financial statements. It does not represent a restatement under US GAAP which would be different in some
significant respects.
EXCHANGE RATES FOR TRANSLATION OF STERLING ($:£1)
Income statement
Statement of financial position
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Profit attributable to ordinary shareholders
Adjusted profit attributable to 52.9% interest in Reed Elsevier combined businesses
Share of joint ventures’:
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Profit attributable to 52.9% interest in Reed Elsevier combined businesses
2014
US$:£
1.65
1.56
2013
US$:£
1.56
1.66
2014
US$m
809
1,059
(244)
(18)
(10)
(13)
59
833
2013
US$m
892
987
(267)
(25)
(11)
(16)
248
916
* Movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
DATA PER AMERICAN DEPOSITARY SHARE (ADS)
Earnings per ADS based on 52.9% interest in Reed Elsevier combined businesses:
Adjusted
Basic
Net dividend per ADS paid in the year
Net dividend per ADS paid and proposed in relation to the financial year
Consolidated statement of financial position
AS AT 31 DECEMBER
Shareholders’ equity
2014
US$
2013
US$
$3.72
$2.84
$1.65
$1.72
$3.37
$3.05
$1.48
$1.54
2014
US$m
1,741
2013
US$m
2,098
Adjusted earnings per American Depositary Share (ADS) is based on Reed Elsevier PLC shareholders’ 52.9% share of the adjusted profit
attributable to the combined businesses, which excludes amortisation of acquired intangible assets, acquisition-related costs,
disposal-related and other non-operating items, the net financing charge or credit on defined benefit pension scheme, and movements
in deferred tax assets and liabilities that are not expected to crystallise in the near term and include the benefit of tax amortisation
where available on acquired goodwill and intangible assets. Adjusted figures are additional performance measures used by
management and are described in note 8 to the Reed Elsevier PLC consolidated financial statements.
Reed Elsevier PLC shares are quoted on the New York Stock Exchange and trading is in the form of American Depositary Shares (ADSs),
evidenced by American Depositary Receipts (ADRs), representing four Reed Elsevier PLC ordinary shares. (CUSIP No. 758205207;
trading symbol, RUK; Citibank NA is the ADR Depositary.)
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190
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
REED ELSEVIER NV
Reed Elsevier NV
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the Reed Elsevier NV consolidated financial statements into US dollars at
the stated rates of exchange. The financial information provided below is prepared under IFRS as used in the preparation of the Reed
Elsevier NV consolidated financial statements. It does not represent a restatement under US GAAP which would be different in some
significant respects.
EXCHANGE RATES FOR TRANSLATION OF EURO ($:€1)
Income statement
Statement of financial position
2014
US$:€
1.33
1.21
2013
US$:€
1.32
1.38
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Adjusted profit attributable to shareholders
Share of joint ventures’:
Amortisation of acquired intangible assets
Acquisition-related costs
Net financing charge on defined benefit pension schemes
Disposals and other non-operating items
Other deferred tax credits from intangible assets*
Profit attributable to shareholders
2014
US$m
1,000
(232)
(17)
(9)
(11)
56
787
* Movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
DATA PER AMERICAN DEPOSITARY SHARE (ADS)
Earnings per ADS based on 50% interest in Reed Elsevier combined businesses:
Adjusted
Basic
Net dividend per ADS paid in the year
Net dividend per ADS paid and proposed in relation to the financial year
2014
US$
$2.85
$2.26
$1.40
$1.57
2013
US$m
933
(253)
(24)
(10)
(15)
234
865
2013
US$
$2.61
$2.40
$1.24
$1.34
Consolidated statement of financial position
AS AT 31 DECEMBER
Shareholders’ equity
2014
US$m
1,644
2013
US$m
1,979
Adjusted earnings per American Depositary Share is based on Reed Elsevier NV shareholders’ 50% share of the adjusted profit
attributable to the Reed Elsevier combined businesses, which excludes amortisation of acquired intangible assets, acquisition-related
costs, disposal-related and other non-operating items, the net financing charge or credit on defined benefit pension schemes, and
movements in deferred tax assets and liabilities that are not expected to crystallise in the near term and include the benefit of tax
amortisation where available on acquired goodwill and intangible assets. Adjusted figures are additional performance measures used
by management and are described in note 9 to the Reed Elsevier NV consolidated financial statements.
Reed Elsevier NV shares are quoted on the New York Stock Exchange and trading is in the form of American Depositary Shares (ADSs),
evidenced by American Depositary Receipts (ADRs), representing two Reed Elsevier NV ordinary shares. (CUSIP No. 758204200;
trading symbol, ENL; Citibank N. is the ADR Depositary.)
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RELX Group Annual Reports and Financial Statements 2014
Reed Elsevier Annual Reports and Financial Statements 2014
191
Shareholder
information
In this section
192 Shareholder information
194 Contacts
195 2015 financial calendar
196 Principal operating locations
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192 FINANCIAL STATEMENTS AND OTHER INFORMATION
SHAREHOLDER INFORMATION
Shareholder information
Annual Reports and Financial Statements 2014
The Annual Reports and Financial Statements for the combined
businesses, Reed Elsevier PLC and Reed Elsevier NV for the year
ended 31 December 2014, and the Corporate Governance
Statement of Reed Elsevier NV are available on the Group’s
website, and from the registered offices of the respective parent
companies shown on page 194. Additional financial information,
including the interim and full-year results announcements,
Interim Management Statements and presentations is also
available on the Group’s website, www.relxgroup.com.
The combined financial statements set out in the Annual Reports
and Financial Statements are expressed in sterling, with
summary combined financial information expressed in euros. The
financial statements of Reed Elsevier PLC and Reed Elsevier NV
are expressed in sterling and euros respectively.
Interim results
Reed Elsevier PLC and Reed Elsevier NV no longer publish interim
results in hard copy. The interim results are available on the
Group’s website, www.relxgroup.com.
Share price information
Reed Elsevier PLC’s ordinary shares are quoted on the London
Stock Exchange.
Reed Elsevier NV’s ordinary shares are quoted on the Euronext
Amsterdam Stock Exchange.
The Reed Elsevier PLC and Reed Elsevier NV ordinary shares are
quoted on the New York Stock Exchange in the form of American
Depositary Shares (ADSs), evidenced by American Depositary
Receipts (ADRs). Each Reed Elsevier PLC ADR represents four
Reed Elsevier PLC ordinary shares. Each Reed Elsevier NV ADR
represents two Reed Elsevier NV ordinary shares.
The Reed Elsevier PLC and Reed Elsevier NV ordinary share
prices and the ADR prices may be obtained from the Group’s
website, other online sources and the financial pages of some
newspapers.
FOR FURTHER INFORMATION VISIT WWW.RELXGROUP.COM
Information for Reed Elsevier PLC
ordinary shareholders
Shareholder services
The Reed Elsevier PLC ordinary share register is administered by
Equiniti Limited. Equiniti provides a free online portal for
shareholders at www.shareview.co.uk. Shareview allows
shareholders to monitor the value of their shareholdings, view
their dividend payments and submit dividend mandate
instructions. Shareholders can also submit their proxy voting
instructions ahead of company meetings, as well as update their
personal contact details. Shareview Dealing provides a share
purchase and sale facility. Equiniti’s contact details appear on
page 194.
Electronic communications
While hard copy shareholder communications continue to be
available to those shareholders requesting them, in accordance
with the Companies Act 2006 and the Company's articles of
association, Reed Elsevier PLC uses the Group’s website as the
main method of communicating with shareholders. By registering
their details online at Shareview, shareholders can be notified by
email when shareholder communications are published on the
Group’s website. Shareholders can also use the Shareview website
to appoint a proxy to vote on their behalf at shareholder meetings.
Shareholders who hold their Reed Elsevier PLC shares through
CREST may appoint proxies for shareholder meetings through the
CREST electronic proxy appointment service by using the
procedures described in the CREST manual.
Dividend mandates
Shareholders are encouraged to have their dividends paid directly
into a UK bank or building society account. This method of payment
reduces the risk of delay or loss of dividend cheques in the post
and ensures the account is credited on the dividend payment date.
A dividend mandate form can be obtained online at
www.shareview.co.uk, or by contacting Equiniti at the address
shown on page 194.
Equiniti has established a service for overseas shareholders in
over 90 countries, which enables shareholders to have their
dividends automatically converted from sterling and paid directly
into their nominated bank account. Further details of this service,
and the fees applicable, are available at www.shareview.co.uk or
by contacting Equiniti at the address shown on page 194.
Dividend Reinvestment Plan
Shareholders can choose to reinvest their Reed Elsevier PLC
dividends by purchasing further shares through the
Dividend Reinvestment Plan (DRIP) provided by Equiniti. Further
information concerning the DRIP facility, together with the terms
and conditions and an application form can be obtained online at
www.shareview.co.uk/dividends or by contacting Equiniti at the
address shown on page 194.
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RELX Group Annual Reports and Financial Statements 2014
193
How to avoid share fraud and boiler room scans
The Financial Conduct Authority (FCA) has issued some guidance
on how to recognise and avoid investment fraud:
§§ Legitimate firms authorised by the FCA are unlikely to contact
you unexpectedly with an offer to buy or sell shares.
§§ If you receive an unsolicited phone call, do not get into a
conversation, note the name of the person and firm contacting
you and then end the call.
§§ Check the Financial Services Register available at
www.fca.org.uk to see if the person and firm contacting you
is authorised by the FCA. If you wish to call the person or firm
back, only use the contact details listed on the Register.
§§ Call the FCA on 0800 111 6768 if the firm does not have any
contact details on the Register, or if you are told that they are
out of date.
§§ Search the list of unauthorised firms to avoid at
www.fca.org.uk/scams.
§§ If you do buy or sell shares through an unauthorised firm, you
will not have access to the Financial Ombudsman Service or the
Financial Services Compensation Scheme.
§§ Consider obtaining independent financial and professional
advice before you hand over any money. If it sounds too good to
be true it probably is.
How to report a scam
If you are approached by fraudsters, please tell the FCA using the
share fraud reporting form at www.fca.org.uk/scams, where you
can find out more about investment scams. You can also call the
FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters, you should
contact Action Fraud on 0300 123 2040.
Share dealing service
A telephone and internet dealing service is available through
Reed Elsevier PLC’s Registrar, Equiniti, which provides a simple
way for UK-resident shareholders to buy or sell Reed Elsevier PLC
shares. For telephone dealing call 08456 037037 between 8.00am
and 4.30pm, Monday to Friday, and for internet dealing log on to
www.shareview.co.uk/dealing. You will need your shareholder
account number shown on your dividend tax voucher.
Individual savings account
A single company ISA for Reed Elsevier PLC shares is available
through Equiniti. Details may be obtained from
www.shareview.co.uk/ISA, by writing to Equiniti at the address
shown on page 194, or by calling their ISA helpline on 0871 384 2244.
ShareGift
The Orr Mackintosh Foundation operates a charity share donation
scheme for shareholders with small parcels of shares whose value
makes it uneconomic to sell them. Details of the scheme can be
obtained from the ShareGift website at www.sharegift.org, or by
telephoning ShareGift on 020 7930 3737.
Sub-division of ordinary shares and share consolidation
On 28 July 1986, each Reed Elsevier PLC ordinary share of £1
nominal value was sub-divided into four ordinary shares of 25p
each. On 2 May 1997, each 25p ordinary share was sub-divided into
two ordinary shares of 12.5p each. On 7 January 2008, the ordinary
shares of 12.5p each were consolidated on the basis of 58 new
ordinary shares of 1451⁄116p nominal value for every 67 ordinary
shares of 12.5p each held.
Capital gains tax
The mid-market price of Reed Elsevier PLC’s £1 ordinary shares on
31 March 1982 was 282p. Adjusting for the sub-divisions and share
consolidation referred to above results in an equivalent mid-market
price of 40.72p for each existing ordinary share of 1451⁄116p nominal
value.
Warning to shareholders –
unsolicited investment advice
§§ From time to time shareholders may receive unsolicited calls
from fraudsters.
§§ Fraudsters use persuasive and high-pressure tactics to lure
investors into scams, sometimes known as boiler room scams.
§§ They may offer to sell shares that turn out to be worthless or
non-existent, or to buy shares at an inflated price in return for
an upfront payment.
§§ While high profits are promised, if you buy or sell shares in this
way you will probably lose your money.
§§ 5,000 people contact the Financial Conduct Authority about
share fraud each year, with victims losing an average of
£20,000.
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194 FINANCIAL STATEMENTS AND OTHER INFORMATION
SHAREHOLDER INFORMATION
Shareholder information and contacts
Information for Reed Elsevier NV
ordinary shareholders
Information for Reed Elsevier PLC and
Reed Elsevier NV ADR holders
Shareholder enquiries
Enquiries from holders of Reed Elsevier NV registered ordinary
shares in relation to share transfers, dividends, change of address
and bank accounts should be directed to the Company Secretary
of Reed Elsevier NV, at the registered office address shown below.
Dividends
Dividends on Reed Elsevier NV ordinary shares are declared and
paid in euros. Registered shareholders in Reed Elsevier NV will
receive dividends from the company by transmission to the bank
account which they have notified to the company. Dividends on
shares in bearer form are paid through the intermediary of a bank
or broker.
Dividend Reinvestment Plan
By instructing their bank or intermediary, shareholders can
choose to reinvest their Reed Elsevier NV dividends by purchasing
further shares through the Dividend Reinvestment Plan (DRIP)
provided by ABN AMRO Bank NV. Further information concerning
the DRIP facility can be obtained online at www.securitiesinfo.com.
Consolidation of ordinary shares
On 7 January 2008, the Reed Elsevier NV ordinary share of €0.06
each were consolidated on the basis of 58 new ordinary shares of
€0.07 each for every 67 ordinary shares of €0.06 each held.
The Reed Elsevier PLC and Reed Elsevier NV ADR Depositary is
Citibank NA
Reed Elsevier PLC’s CUSIP number is 758205207 and its trading
symbol is RUK. Each Reed Elsevier PLC ADR represents four Reed
Elsevier PLC ordinary shares.
Reed Elsevier NV’s CUSIP number is 758204200 and its trading
symbol is ENL. Each Reed Elsevier NV ADR represents two Reed
Elsevier NV ordinary shares.
ADR shareholder services
Enquiries concerning Reed Elsevier PLC or Reed Elsevier NV
ADRs should be addressed to the ADR Depositary at the address
shown below.
Dividends
Dividend payments on Reed Elsevier PLC and Reed Elsevier NV
ADRs are converted into US dollars by the ADR Depositary.
Annual Report on Form 20-F
The Annual Report on Form 20-F for the Reed Elsevier combined
businesses, Reed Elsevier PLC and Reed Elsevier NV is filed
electronically with the United States Securities and Exchange
Commission. A copy of the Form 20-F is available on the Group’s
website, or from the ADR Depositary at the address shown below.
Reed Elsevier PLC and Reed Elsevier NV ADR Depositary
Citibank Depositary Receipt Services
PO Box 43077
Providence, RI 02940-3077
USA
WWW.CITI.COM/DR
Email: citibank@shareholders-online.com
Tel: +1 877 248 4327
+1 781 575 4555 (callers outside the US)
Reed Elsevier PLC
1-3 Strand
London WC2N 5JR
United Kingdom
Tel: +44 (0)20 7166 5500
Fax: +44 (0)20 7166 5799
Auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ
United Kingdom
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing BN99 6DA
West Sussex
United Kingdom
WWW.SHAREVIEW.CO.UK
Reed Elsevier NV
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 485 2222
Fax: +31 (0)20 485 2032
Deloitte Accountants BV
Gustav Mahlerlaan 2970
1081 LA Amsterdam
The Netherlands
Listing/paying agent
ABN AMRO Bank NV
Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
WWW.SECURITIESINFO.COM
Tel: 0871 384 2960
(calls cost 8p per minute plus additional network charges
where applicable)
Tel: +44 121 415 7047 (callers outside the UK)
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RELX Group Annual Reports and Financial Statements 2014
195
2015 financial calendar
26 February
22 April
22 April
23 April
29 April
30 April
1 May
4 May
22 May
28 May
23 July
5 August
6 August
7 August
28 August
2 September
PLC/NV
PLC/NV
NV
PLC
PLC
PLC/NV
PLC
NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
Results announcement for the year ended 31 December 2014
Interim management statement issued in relation to the 2015 financial year
Annual General Meeting – Reed Elsevier NV, World Trade Center, Strawinskylaan 77, 1077 XW Amsterdam
Annual General Meeting – Reed Elsevier PLC, Millennium Hotel, Grosvenor Square, London W1K 2HP
Ex-dividend date – 2014 final dividend, Reed Elsevier PLC ADRs
Ex-dividend date – 2014 final dividend, Reed Elsevier PLC ordinary shares and Reed Elsevier NV ordinary
shares and ADRs
Record date – 2014 final dividend, Reed Elsevier PLC ordinary shares and ADRs
Record date – 2014 final dividend, Reed Elsevier NV ordinary shares and ADRs
Payment date – 2014 final dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
Payment date – 2014 final dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
Interim results announcement for the six months to 30 June 2015
Ex-dividend date – 2015 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
Ex-dividend date – 2015 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
Record date – 2015 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
Payment date – 2015 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
Payment date – 2015 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
The following tables set out dividends paid (or proposed) in relation to the three financial years 2012–2014.
ORDINARY SHARES
Final dividend for 2014*
Interim dividend for 2014
Final dividend for 2013
Interim dividend for 2013
Final dividend for 2012
Interim dividend for 2012
pence per PLC ordinary share
€ per NV ordinary share
Payment date
19.00
7.00
17.95
6.65
17.00
6.00
0.438
0.151
0.374
0.132
0.337
0.130
22 May 2015
28 August 2014
23 May 2014
29 August 2013
23 May 2013
31 August 2012
* Proposed dividend, to be submitted for approval at the respective Annual General Meetings of Reed Elsevier PLC and Reed Elsevier NV in April 2015.
ADRs
Final dividend for 2014
Interim dividend for 2014
Final dividend for 2013
Interim dividend for 2013
Final dividend for 2012
Interim dividend for 2012
$ per PLC ADR
$ per NV ADR
Payment date
**
0.46398
1.20918
0.412
1.02578
0.37898
**
0.39752
1.01892
0.34948
0.86555
0.32515
28 May 2015
4 September 2014
30 May 2014
5 September 2013
30 May 2013
7 September 2012
** Payment will be determined using the appropriate £/US$ and €/US$ exchange rate on 22 May 2015.
Note: The dividend rates shown for Reed Elsevier NV ordinary shares and ADRs are gross dividend rates before the deduction of Dutch
withholding tax.
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196 FINANCIAL STATEMENTS AND OTHER INFORMATION
2015 FINANCIAL CALENDAR
Principal operating locations
RELX Group
1-3 Strand
London WC2N 5JR
United Kingdom
Tel: +44 (0)20 7166 5500
Fax: +44 (0)20 7166 5799
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 485 2222
Fax: +31 (0)20 485 2032
230 Park Avenue
New York, NY 10169
USA
Tel: +1 212 309 8100
Fax: +1 212 309 8187
FOR FURTHER INFORMATION OR CONTACT DETAILS,
PLEASE CONSULT OUR WEBSITE: WWW.RELXGROUP.COM
Elsevier
Radarweg 29
1043 NX Amsterdam
The Netherlands
WWW.ELSEVIER.COM
The Boulevard
Langford Lane
Kidlington
Oxford OX5 1GB
United Kingdom
125 London Wall
London EC2Y 5AJ
United Kingdom
1600 John F. Kennedy Blvd
Suite 1800
Philadelphia, PA 19103
USA
3251 Riverport Lane
Maryland Heights, MO 63043
USA
LexisNexis Risk Solutions
1000 Alderman Drive
Alpharetta, GA 30005
USA
WWW.LEXISNEXIS.COM/RISK
Reed Business Information
Quadrant House
The Quadrant
Sutton
Surrey SM2 5AS
United Kingdom
WWW.REEDBUSINESS.CO.UK
LexisNexis Legal & Professional
230 Park Avenue
New York, NY 10169
USA
WWW.LEXISNEXIS.COM
9443 Springboro Pike
Miamisburg, OH 45342
USA
Lexis House
30 Farringdon Street
London EC4A 4HH
United Kingdom
WWW.LEXISNEXIS.CO.UK
Reed Exhibitions
Gateway House
28 The Quadrant
Richmond
Surrey TW9 1DN
United Kingdom
WWW.REEDEXPO.COM
Elsevier Reed Finance BV
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 4852222
Fax: +31 (0)20 4852032
94118_Reed_AR_p191-196.indd 196
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(FSC) chain-of-custody certified.
RELX Group is a world-leading provider of
information solutions for professional customers
across industries.
We help scientists make new discoveries, lawyers
win cases, doctors save lives, and executives forge
commercial relationships with their clients. We help
insurance groups offer customers lower prices
by assessing risk better, and save taxpayers and
consumers money by enabling governments and
financial groups to detect fraud.
RELX Group is owned by two parent companies:
Reed Elsevier PLC is the London Stock Exchange
listed vehicle for holding shares in RELX Group.
Shareholders in Reed Elsevier PLC own a 52.9%
economic interest in the Group.
Reed Elsevier NV is the Amsterdam Stock Exchange
listed vehicle for holding shares in RELX Group.
External shareholders in Reed Elsevier NV own a
47.1% economic interest in the Group.
Forward-looking statements
The Reports and Financial Statements 2014 contain forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section
21E of the US Securities Exchange Act of 1934, as amended. These statements are subject to a number of risks and uncertainties that could cause actual results or outcomes
to differ materially from those currently being anticipated. The terms “estimate”, “project”, “plan”, “intend”, “expect”, “should be”, “will be”, “believe”, “trends” and similar
expressions identify forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but are not
limited to competitive factors in the industries in which the Group operates; demand for the Group’s products and services; exchange rate fluctuations; general economic and
business conditions; legislative, fiscal, tax and regulatory developments and political risks; the availability of third-party content and data; breaches of our data security
systems and interruptions in our information technology systems; changes in law and legal interpretations affecting the Group’s intellectual property rights and other risks
referenced from time to time in the filings of the Group with the US Securities and Exchange Commission.
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www.relxgroup.com
Annual Reports and
Financial Statements
2014
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