Financial needs and resources

Excluding the £1.5 billion return of capital to shareholders, net funds increased by £189 million during 1998. Total net debt at 31 December 1998 amounted to £3 million and comprised cash and short term investments of £1,006 million offset by £1,009 million of debt.

“Free cash flow” which comprises operating cash flow plus net interest and other investment income received less tax paid and expenditure on tangible fixed assets was £490 million, compared with £449 million in 1997. This reflects higher cashflow from operations and reduced capital expenditure, offset by increased tax payments arising from timing differences between the payment and recovery of advance corporation tax and reduced net interest income following the return of surplus capital to shareholders.

Additions to fixed assets were £296 million, £65 million lower than 1997. Subscriber equipment expenditure fell £13 million to £119 million and other equipment additions fell £52 million to £177 million due principally to lower levels of infrastructure spending following the heavy investment in capacity in 1997. Reuters spent £157 million on acquisitions and investments compared to £29 million in 1997, principally in the areas of funds measurement and automated entry of stock orders.

Dividends paid were £188 million, £8 million down from 1997, reflecting the reduced number of shares in issue following the capital reorganisation, offset by an increase in dividends per share.

Reuters expects to be able to finance its current business plans from existing resources and facilities. In February 1998 Reuters Group PLC put in place syndicated loan facilities with a total commitment of £1.5 billion, of which £1.0 billion expired in December 1998 and £500 million expires in December 2002.

A Euro Commercial Paper Programme was established in March 1998 providing access to £1.5 billion in uncommitted finance, subject to market conditions. In December 1998 Reuters established a Euro Medium Term Note Programme which will provide access to up to £1.0 billion of uncommitted facilities, subject to market conditions. In addition, at 31 December 1998 Reuters had unused, short-term uncommitted bank borrowing facilities denominated in various currencies, the sterling equivalent of which was approximately £230 million, at money market rates varying principally between 2% and 13% depending on the currency.

In February 1998 Reuters entered into a joint venture with Rudin Times Square Associates, LLC to develop an 855,000 square foot building in the Times Square section of New York City, to be known as “The Reuters Building”. Each party will invest approximately US$45 million of equity, with other costs to be funded through a loan. The total cost of the project is estimated to be approximately US$360 million.