SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of February 2000

REUTERS GROUP PLC
(Translation of registrant’s name into English)

85 FLEET STREET, LONDON EC4P 4AJ, ENGLAND
(Address of principal executive offices)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.]

Form 20-F __X__          Form 40-F _____

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.]

Yes_____          No __X__

THIS REPORT IS INCORPORATED BY REFERENCE IN THE PROSPECUTSES CONTAINED IN POST EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO. 33-16927 ON FORM S-8, POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-69694 ON FORM F-3, POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-90398 ON FORM S-8, POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 333-7374 ON FORM F-3 AND REGISTRATION STATEMENT NO. 333-5998 ON FORM S-8 FILED BY THE REGISTRANT UNDER THE SECURITIES ACT OF 1933.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

REUTERS

International News Release

Reuters Group PLC

Preliminary Statement

For the year ended December 1999

Reuters Group PLC
85 Fleet Street
London EC4P 4AJ

Tel. 020 7250 1122
Reg. No. 3296375

Contents

1

Reuters Group PLC

Highlights of the Preliminary Results
for the year ended 31 December 1999

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Summary of Results

The following is a summary of the unaudited results of Reuters Group PLC (NASDAQ symbol: RTRSY) for the year to 31 December 1999:

Notes:

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Reuters Internet Strategy

Reuters announces today a range of major initiatives designed to accelerate its use of internet technologies, open new markets and migrate its core business to an internet-based model.

Chief Executive Peter Job comments: “The Internet has opened up two big opportunities for Reuters. It has enabled us for the first time to start serving an infinitely wider market, including individuals making financial decisions at home and at work. We estimate that more than 40 million individual users are now looking at our information on 900 websites. It has also allowed us to adopt a more cost-effective model for our base business. The Internet recognises no frontiers and points towards a single global product range which is cheap to deliver, administer and maintain.

“To get best advantage from these opportunities we are expanding our capabilities through partnerships and spin-offs where strategically justified. To our broad base of technology and content, we have now added a communications business in partnership with Equant. This makes us one of the few organisations active on the Internet to have achieved this strategic convergence. We have leveraged our investments in leading US-based internet companies to form new partnerships in Europe. The spin-off of TIBCO Software, now capitalised at US$10 billion, has created a major new supplier of internet software. This momentum will continue in the current year.”

Reuters plans to spend £500 million over the next four years in the migration of its services to internet technology. Other initiatives include the appointment of advisors to prepare for an Initial Public Offering (IPO) of a portion of its Greenhouse Fund in order to build on the success of the Fund at a faster pace. Reuters plans to build a new financial portal to service the consumer finance market. Our intent to form a new venture with Aether Systems, a leading wireless applications service provider in the US, to provide custom wireless solutions to the European market is announced today. The company also announces plans today for a joint venture with Multex, which distributes broker research globally, to create a website to develop a community of private investors in Europe. These are in addition to the formation of the venture with Equant, announced last week, which addresses a new market for a secure financial extranet. It allows Reuters to move products to internet protocol delivery at a faster pace and at the same time will contribute to the remodelling of its cost base.

Organisational development

The company is now focused on three business areas. The first, Reuters Financial, will consist of two divisions: Reuters Information (RI) and Reuters Trading Solutions (RTS). RI is being expanded to include the Global Sales and Operations unit. RTS will take on responsibility for relationships with the Group’s global accounts. The second is a stand-alone subsidiary, Instinet, the electronic equities and fixed income brokerage. The third, Ventures, is the vehicle for development of new businesses outside the core financial markets. Ventures is to be renamed Reuterspace to reflect the bringing together of businesses operating in new areas.

Management changes include the appointment of Philip Green, Chief Executive RTS, to the Board. He will continue to manage RTS. Jean-Claude Marchand will become Chairman of RI and Global Marketing Director. Tom Glocer, who is currently running Reuters business in the Americas, will join the Group Executive as Chief Executive RI. André Villeneuve will leave the Board immediately to focus on Instinet

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as its Chairman. He will be based in New York. David Ure will also leave the Board in due course to concentrate on his role as Chairman of the new venture with Equant.

Results

Profit before tax, including gains from the sales of investments, was £632 million (US$1,017 million), up 9% at actual exchange rates. Earnings per share rose 13% to 30.2p from 26.7p in 1998. A final dividend of 11p is proposed, making a total for the year of 14.65p, a rise of 2%.

Underlying revenue for 1999, excluding Reuters Business Briefing and TIBCO Software, of £3,081 million (US$4,961 million), increased by 4% at actual rates and 2% at comparable rates. Earnings before interest, tax, depreciation and amortisation (EBITDA) were £1,008 million (US$1,622 million), up 5% at actual rates and up 6% at comparable rates.

Operating profit at £549 million (US$883 million) was flat at actual rates and up 3% at comparable rates. Growth was held back by lower profits from Reuters Trading Solutions, in part as a result of the millennium freeze, and in part as a result of weak foreign exchange markets. Instinet also substantially increased investment in new projects.

Profit on disposals of investments, mainly from the Greenhouse Fund, was £50 million (US$81 million). Net interest payable was £4 million (US$7 million) compared to £2 million (US$3 million) net interest receivable in 1998. Capital expenditure declined by £52 million to £244 million, and acquisitions and investments decreased by £22 million to £135 million. Net funds were £41 million.

Reuters successfully completed its millennium transition programme without any significant problem. Incremental costs associated with this in 1999 were £25 million (US$40 million) compared to £31 million (US$50 million) in 1998.

Reuters Financial

Reuters Information’s revenue increased by 6% at actual rates to £1,619 million (US$2,607 million). Contribution rose 60% at actual rates and the margin improved from 10% to 16%. This improvement reflects the benefit of a one-off improvement in data costs and cost savings associated with the divisional restructuring last year. Sales of Reuters 3000 and domestic products, particularly in the US, showed good growth during the year.

Reuters Trading Solutions’ revenue declined by 6% at actual rates. Dealing revenue continued to slip as foreign exchange markets experienced further consolidation and lower volumes. Revenue for Financial Enterprise Systems and Risk Management Systems declined in the second half because of customer reluctance to install new systems ahead of the Millennium.

Reuters Financial revenue in the second half, and particularly the fourth quarter, was affected by millennium freezes imposed by many customers. The “Millennium Effect” is beginning to unwind, but will still have some impact on installations in the first quarter. The one-off benefit from information data costs in 1999 offset the incremental costs of the Millennium Programme.

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Reuters Financial will take a reorganisation charge of £300 million over the next two years, of which £150 million is likely to be taken this year. In addition to current spending, Reuters Financial will invest a further £50 million per annum to develop its e-architecture. These two measures, together with a planned rationalisation of development centres, are expected to provide cost savings of £150 million per year by 2002.

Instinet

Against a background of significant change in its markets, Instinet achieved revenue growth of 18% overall and 39% in its international business. Strong volume growth in US markets was partly offset by price reductions. Instinet invested £39 million in new product development and a re-branding and advertising campaign which led to a reduction in contribution to £129 million. This increased investment will continue in 2000.

Reuters is actively considering its strategic options for Instinet, one of which is an Initial Public Offering. At the same time, Instinet is developing a number of new opportunities including products for the fixed income and retail markets, both of which will be launched in the near future.

Reuterspace

Reuterspace will include the following activities: Reuters Media; Reuters Enterprise, for the business-to-business market; Reuters Personal, for the retail finance market; Reuters Mobile; Reuters Greenhouse; and Reuters Partners, to work with, among others, TIBCO Software.

This division developed its business with good revenue growth and a range of strategic acquisitions. Reuters Media revenue derived from internet sales grew 226%, at actual rates, while underlying revenue for the division, excluding divestitures, grew 11% at actual rates. Reuters Business Briefing became part of the Factiva joint venture with Dow Jones in July 1999. A Wireless business was created during the year to galvanise new technology and the market for mobile access to data. The acquisitions of The TowerGroup, an IT research and advisory firm, and ORT, a provider of company information in France, have enabled the development of corporate information businesses in both the research and credit markets.

The Greenhouse Fund broadened its activity to Europe and Japan. At the year end it had 38 investments, 12 of which had successfully floated. Recent IPOs and the strength of the market have boosted the value of the Fund’s quoted investments from £68 million at the end of July 1999 to £438 million at the year end.

Associates

Losses and associated goodwill charges for associates in 1999 increased to £17 million, reflecting the creation of the Factiva joint venture and the IPO of TIBCO Software Inc. in the second half. With the addition of results from the venture with Equant, these losses will be higher in 2000.

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Dividend Policy

Future dividends will be based on the results of Reuters Financial, consisting of RI and RTS, with the intention that payments will be covered at least 1.7 times by underlying earnings, excluding goodwill, as they would have been in 1999.

Prospects

Reuters Financial will continue to make progress at constant exchange rates over the next two years. After providing for the restructuring costs in this business, its profits are bound to be significantly lower in 2000. Group profits overall will reflect this as well as the impact of accelerated Group-wide investment programmes. We are confident the range of major initiatives now being implemented will create further value for shareholders.

END

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Revenue Analysis – Year to 31 December 1999

8

Revenue Analysis –fourth quarter 1999

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Review of Year End Results

The following review has been prepared in accordance with both the recommendations of the UK Accounting Standards Board in their statement entitled ‘Operating and Financial Review’, and the US requirement for a 'Management’s Discussion and Analysis of Financial Condition and Results of Operations.’

Under US law all statements other than statements of historical fact included in this review are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Certain important factors that could cause actual results to differ materially from those discussed in such forward-looking statements are described under “Cautionary Statements” on pages 38 to 40 as well as elsewhere in this review. All written and oral forward-looking statements made on or after the date hereof and attributable to Reuters are expressly qualified in their entirety by such Cautionary Statements.

1.  Financial summary

Revenue increased 3% at actual rates to £3,125 million in 1999. At comparable rates revenue increased 1% compared with 9% growth in 1998.

Underlying revenue excluding Reuters Business Briefing and TIBCO Software Inc. increased 4% at actual rates to £3,081 million in 1999. At comparable rates underlying revenue increased 2% compared with 7% growth in 1998.

Operating profit before currency hedging grew by 6% at actual rates and 3% at comparable rates, compared to growth of 14% at comparable rates in 1998. Actual rates performance benefited from the weakness of sterling against the US and Japanese currencies. Operating profit after currency hedging was flat at £549 million.

Total goodwill in the year was £61 million, of which £14 million was charged to associated companies. This compares to goodwill of £51 million in 1998 of which £5 million was charged to associated companies, and total goodwill of £51 million in 1997.

Incremental external Millennium costs were £25 million in 1999, compared to £31 million in 1998. Total Millennium costs were £42 million in 1999, compared to an original budget of £28 million. Spend in 1998 was £55 million.

Recognised currency hedging gains in the year were £9 million compared with £45 million in 1998 and £56 million in 1997. The reduction in 1999 was due mainly to the relative strength of sterling when hedging for 1999 was undertaken.

Operating profit margin was 17.6%, slightly lower than the 1998 margin of 18.2%, (1997 margin 18.8%).

Disposal of fixed asset investments realised a profit of £50 million, compared to £26 million in 1998, mainly relating to Greenhouse Fund disposals.

The successful IPO of TIBCO Software Inc. on NASDAQ resulted in an accounting profit of £52 million in 1999.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 5% at actual rates to £1,008 million, and

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increased 6% at comparable rates. This compares with growth in 1998 of 6% at actual rates and 14% at comparable rates.

EBITDA has been restated to include profits and losses derived from the disposal of subsidiary undertakings and fixed asset investments. Comparatives have been restated accordingly.

Net interest payable was £4 million compared with net interest receivable of £2 million in 1998 and £80 million in 1997. This reflected the return of £1.5 billion of cash to shareholders in February 1998.

Profit before tax increased 9% to £632 million in 1999, compared with a decline of 7% in 1998 at actual rates.

The tax charge for 1999 is based on an effective tax rate of 30% (34.9% in 1997) on profit before goodwill amortisation compared with a rate of 31% in 1998 and the UK corporate tax rate of 30.25% for 1999.

Earnings per share increased 13% in 1999 to 30.2p from 26.7p in 1998 ahead of profit before tax growth. This is principally a result of the reduction in the tax rate. Earnings per share growth in 1998 was 11%.

Free cash flow per share was 28.4p, down 17% from 34.1p in 1998 reflecting higher working capital requirements. Free cash flow per share in 1997 was 27.7p.

Investment in the business continued with £244 million of fixed asset additions, £197 million of development expenditure and £89 million of acquisitions and investments net of disposal proceeds. The impact of acquisitions and disposals was not material to group revenue and operating profit growth.

2.  Operating performance

Revenue by type

Recurring revenue, which is principally derived from the sale of subscription services, represented 75% of group revenue in 1999, compared with 73% in 1998 and 74% in 1997.

Usage-based revenue, principally derived from Instinet and Dealing 2000-2, represented 19% of total revenue in line with 1998 and 18% of total revenue in 1997.

Outright revenues which comprises once-off sales of information management systems and risk management software, represented 6% of group revenue in 1999 and 8% in both 1998 and 1997.

Revenue by geography

Revenue by geography

Revenue in Europe, Middle East and Africa (EMA) fell by 1% at both actual rates and comparable rates in 1999 and grew 6% at actual rates and 8% at comparable rates in 1998.

The Americas saw revenue growth of 11% at actual rates and 8% at comparable rates in 1999 and 4% at actual rates and 5% at comparable rates in 1998.

Revenue in Asia grew 3% at actual rates and fell 4% at comparable rates in 1999 and fell 6% at actual rates and 2% at comparable rates in 1998.

Divisional performance

With effect from 1 January 1999, Reuters restructured its business along divisional lines around the markets that it serves:

Global Financial Markets
Reuters Information (RI)
Reuters Trading Systems (RTS)

Electronic Equity Brokerage
Instinet

Other Markets
Reuters Ventures (RV), including the Greenhouse Fund.

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% Divisional revenue

RI and RTS, the two largest divisions, distribute their products to customers through a common infrastructure, the Global Sales and Operations Group (GSO), responsible for sales, delivery, installation and customer support. Instinet and RV operate on an autonomous basis.

Divisional profit performance (contribution) excludes goodwill and currency hedging which are managed and reported on a Group basis.

Divisional results for 1998 and 1999 exclude Reuters Business Briefing, accounted for as a joint venture since its merger with Dow Jones Interactive in July 1999 and renamed Factiva, and TIBCO Software Inc., accounted for as an associate following its IPO in July 1999.

1999 Divisional performance

Overall divisional revenue growth of 2% at comparable rates compares to growth of 8% in 1998.

The combined revenue of RI and RTS represented 78% of total divisional revenue and 80% in 1998 (1997: 79%).

Divisional contribution increased 5% at actual rates to £597 million compared with growth of 3% in 1998.

RI and RTS combined represented 82% of total divisional contribution for 1999 with growth of 6% at comparable rates. In 1998 combined contribution represented 88% of total divisional contribution with growth of 17%.

Contribution margin
at actual rates

Contribution margin at actual rates was 19%, broadly in line with 1998 and 17% in 1997.

The RTS and Instinet margins in 1999 were impacted by decline in profitability of Dealing and Instinet US respectively, combined with internal investments in new initiatives.

Divisional second half performance

Revenue growth at comparable rates was 5% in the first half of the year and flat in the second half. The second half results reflected in particular the effect that millennium concerns had on many of our customers who deferred purchases.

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Fourth quarter revenue was flat at both actual and comparable rates.

Growth in contribution at comparable rates improved from 1% in the first half to 3% in the second half.

Joint Ventures, Associates and Investments

Excluded from operating profit are a number of strategic investments, minority stakes and joint ventures managed by the Divisions. The more significant of these are set out below:

Reuters Trading Systems:

GL Trade is a developer of interactive software providing ‘electronic’ gateways to electronic exchanges. Reuters share of GL Trade’s profit for 1999 was £2 million.

Reuters Ventures:

Factiva is a joint venture that combines the businesses of Reuters Business Briefing and Dow Jones Interactive. Reuters share of Factivas losses for the second half of the year was £4 million.

Disposal of Greenhouse Fund investments realised a profit of £37 million in the year. The Fund acquired new investments costing £61 million.

Reuters share of profits from ITN, which principally provides daily scheduled programmes of international and national news for television and radio, was £2 million in 1999.

Instinet:

Trade Point is a London-based for-profit stock exchange offering an electronic order driven equities market for UK securities.

Archipelago is an electronic communications network for NASDAQ stocks to match purchases and sales electronically outside the exchange trading system.

W.R. Hambrecht is an investment bank offering an ‘Open IPO’ system that allows companies to be taken public via auction on the Internet.

Corporate:

TIBCO Software Inc. is a provider of real-time infrastructure software for the Internet. Reuters share of the TIBCO Software Inc.’s loss for the second half of the year was £3 million.

Reuters realised an accounting profit of £52 million from the successful IPO of Tibco Software Inc. on NASDAQ in July 1999. Voting rights of Reuters are restricted to 49% and accordingly this company is now accounted for as an associate.

If all outstanding employee options were exercised our diluted shareholding would be 47%.

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3.  Divisional review

Reuters Information

Reuters Information (RI) is responsible for the majority of financial information products. Its aim is to produce, for financial professionals and their clients, its own differentiated content and features while aggregating key third party products in a convenient way.

Revenue growth at actual rates was 6%, or 4% at comparable rates with growth in 1998 of 7% at comparable rates. Excluding the impact of acquisitions, underlying revenue growth was 3% at comparable rates in 1999 and 7% in 1998.

RI costs declined by 2% at comparable rates in 1999 and increased 7% at comparable rates in 1998, resulting in a contribution growth of 52% in 1999 and 15% in 1998. The reduction in costs reflects the benefits from the divisional restructuring, including the rationalisation of central development groups and streamlining of sales and support activities. Also included is the reversal of an accrual in respect of third party data fees no longer required. Excluding the benefit from this reversal, RI contribution at comparable rates would have been 38%.

Revenues in Europe, Middle East and Africa grew 5% at comparable rates. Double-digit growth in Germany and a strong performance in Italy more than offset low growth in the UK.

Revenue growth of 6% was achieved in the Americas at comparable rates. This included the impact of the acquisition of Lipper Analytical Services in July 1998. Excluding Lipper, underlying revenue from North America grew by 2% and revenue from Latin America declined by 4%.

Difficult trading conditions continued to affect the business in Asia where revenue declined by 2% at comparable rates. Revenue reductions in Hong Kong and Indonesia offset 4% revenue growth in Japan.

The presentation of access numbers has been revised to exclude Online Investor Services accesses because the product is sold on a license rather than individual subscriber basis.

The number of “other upper tier” accesses declined by 14% in 1999 and 4% in 1998 as customers transferred to the 3000 products.

Mobile includes short messaging services, pocket watches and pagers.

Overall RI installed accesses grew by 11% in 1999 compared to growth of 13% in 1998. Approximately 28% of 3000 installations at 31 December 1999 related to new users of which over 6,300 were installed during 1999.

Revenue per access declined 7% at comparable rates, primarily as a result of a greater proportion of lower priced Off Trading Floor and domestic products.

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Reuters Trading Systems

Reuters Trading Systems (RTS) supplies customers with an open technology and transaction framework for improving their business processes. This means developing applications and trade execution facilities that can be used alongside other systems customers may own and linking these to a variety of information sources, either internally or externally via the Internet.

During 1999 RTS was affected by customer restrictions on project implementations due to preparations for the millennium changeover. This delayed systems purchase decisions. The introduction of the euro and continued consolidation in the finance industry depressed the foreign exchange transaction business.

Revenue from the underlying business, excluding Reuters Voice Systems, which was sold in December 1998, declined by 4% at actual rates and 5% at comparable rates in 1999 and grew by 4% at actual rates in 1998.

Costs increased by 1% compared to 1998 and remained stable at comparable rates. Investment in development and sales support at TIBCO Finance and in Securities Transactions Systems were partly offset by cost reductions in the Dealing business and the disposal of Reuters Voice Systems. In 1998 costs increased by 3% at actual rates and 6% at comparable rates.

Dealing accesses at the end of 1999 numbered 23,000, a decline of 5% compared with 1998 and dealing accesses at the end of 1998 fell 4% compared with 1997.

Excluding the impact of the acquisitions of MarketNet and Decision Support Systems SA (DSS), revenue decreased by 8% at actual rates. Revenue growth was lower in the second half of the year as a result of customer millennium freezes and a consequential decline in license sale revenues at TIBCO Finance.

Strong revenue growth from Risk Management products in the first half of the year was offset by a slow second half as customers instituted millennium freezes on new software implementations. In 1998 revenue growth was 46% at comparable rates and 39% at actual rates.

Other revenue includes securities order management via Reuters Intertrade Direct formed from the Liberty SA acquisition. Average monthly trading volumes on Reuters InterTrade Direct in 1999 have grown by more than 200% compared to 1998.

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Instinet

Instinet provides global electronic equity brokerage services to investment professionals.

Revenue grew 18% at actual rates in 1999 and 15% at comparable rates, with US revenue growth of 10% and International revenue growth of 39%. Instinet revenue growth at actual rates in 1998 was 16%.

The US equity business saw share volumes increase by 21% although average cents per share price continued to decline. As a result revenue growth in the US was restricted to 10% at comparable rates. In the international markets trading volumes increased 36% compared to 1998, (52% in 1997).

Investment in 1999 included £65 million of capital expenditure particularly on system capacity, which was required to comply with US trading rule changes. In addition £23 million was spent on the development and preparation to launch a fixed income product and £16 million in the development of a retail product, including £6 million of branding expenditure. This contributed to a decline in contribution of 18% at comparable rates, (6% growth in 1998).

Instinet continues to face significant change in its core markets driven by new and developing technologies, increased competition and an evolving regulatory environment.

Reuters is actively considering its strategic options for Instinet, one of which is an Initial Public Offering. At the same time, Instinet is developing a number of new opportunities including products for the fixed income and retail markets, both of which will be launched in the near future.

For information concerning certain rules that could affect Instinet’s business see Cautionary Statements: ‘SEC rules on ECN usage’, ‘SEC Rules for Alternative Trading Systems’, and ‘NASD initiatives’ on pages 38 to 39.

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Reuters Ventures

Reuters Ventures is the umbrella for a suite of business activities aimed at opportunities outside the core wholesale finance market and also contains the Media Group which houses the traditional news and internet new media publishing business.

Revenue for the period grew 2% at actual rates and remained constant at comparable rates. Excluding the impact of acquisitions and disposals, underlying revenue grew 11% at actual rates and 10% at comparable rates.

Revenue growth was fuelled by growth of 226% at actual rates derived from internet sales which was offset by slower growth opportunities in traditional text publishing markets.

During the year Venture One and The TowerGroup were acquired.

Revenue for 1998 was 8% lower than in 1997 due to the disposal of the satellite services business in 1997 and fewer TV location specials.

Reuters Ventures costs fell by 5% at actual rates in 1999 and fell by 8% in 1998. Excluding acquisitions and disposals, costs increased 5% at actual rates and 4% at comparable rates. Benefits from the reductions in the TV cost base have been offset by higher Greenhouse costs.

Greenhouse Fund

The Reuters Greenhouse Fund, which holds 38 investments in quoted and unquoted US, European and Asian high technology companies, disposed of a number of investments in 1999 resulting in a pre-tax profit of £37 million. At 31 December 1999 the market value of quoted Greenhouse Fund investments was £438 million.

Other initiatives include the appointment of advisors to prepare for an Initial Public Offering (IPO), of a portion of its Greenhouse Fund in order to build on the success of the Fund at a faster pace.

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4.  Group costs

The presentation of costs by function has been revised to reflect more closely the activities under which costs are managed in the new divisional organisational structure. Where costs relate to two or more divisions they are allocated across divisions using the most appropriate metrics available. These allocation methods may change over time as measurement techniques are refined.

Production and communications

This comprises costs involved in the development and delivery of Reuters products and content to its clients. These costs fell by 1% at actual rates (increased 6% in 1998) due principally to the streamlining of development activity and the one-off reversal of an accrual in respect of third party data fees.

Selling and marketing

These costs relate to sales, marketing and client support activities. Selling and marketing have increased by 7% in line with the growth in 1998, principally reflecting growth in salary costs.

Support services and administration costs

This represents the cost of maintaining the company’s internal infrastructure, including internal systems, property and office costs, finance, legal and general management costs. These costs have increased by 10% (compared to growth of 5% in 1998) due to a significant increase in support and general management costs at Instinet.

Staff costs rose by 5% at comparable rates on average headcount in the year of 16,662 compared to 16,690 in 1998. Staff costs in 1998 at comparable rates were 14% higher than in 1997.

Services costs increased 8% at comparable rates in 1999 (2% in 1998) due to expenditure associated with the Millennium Programme and higher advertising spend.

Depreciation decreased by 6% at comparable rates in 1999 (increased 7% in 1998) due to lower subscriber capital expenditure as clients increasingly opt to use their own hardware.

Data costs fell 8% at comparable rates in 1999 (grew 20% in 1998) reflecting the one-off reversal of an accrual in respect of third party data fees no longer required.

Communication costs fell 3% in 1999 (increased 7% in 1998) with increased capacity requirements offset by tariff reductions.

5.  Shareholder value

Reuters aims to grow its value and outperform its peers. Reuters believes that its mix of assets, some of which are unique to the company, will help it to meet this aim. These assets, some of which are not included in the consolidated balance sheet, include:

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Reuters uses a model for measuring and ranking its total shareholder return (TSR) compared with that of the other 99 companies in the FTSE 100 index at the start of each measurement period. This model is used to determine vesting of awards under performance-linked share plans. Reuters rankings over the completed three-year periods, and ongoing two and one-year measurement periods are set out below:

Reuters TSR ranking in FTSE 100

6.  Financial needs and resources

“Free cash flow” which comprises operating cash flow and investment income received less net interest expense, tax paid and expenditure on tangible fixed assets was £402 million, compared with £490 million in 1998 and £449 million in 1997. The reduction in 1999 reflected higher working capital requirements, in particular the net increase in counterparty balances at Instinet.

Additions to tangible fixed assets were £244 million, £52 million lower than 1998. Subscriber equipment expenditure declined £54 million to £65 million in 1999 as spending on millennium and 3000 product upgrades declined. Other equipment additions rose £2 million to £179 million.

Reuters spent £135 million on acquisitions and investments compared to £157 million in 1998. In 1999 £68 million was spent on Reuters shares acquired by an employee share ownership trust compared with £7 million in 1998 and £14 million in 1997. Proceeds from the sale of fixed asset investments was £39 million, principally relating to Greenhouse Fund disposals in 1999.

Reuters paid dividends of £207 million, up £19 million from 1998, reflecting an increase in dividends per share and a marginal increase in the number of shares in issue.

Future dividends will be based on the results of RI and RTS, with the intention that payments will be covered at least 1.7 times before goodwill by underlying earnings as they would have been in 1999.

In 1999 Reuters repurchased and cancelled 4.7 million ordinary shares at a total cost of £25 million.

Net funds at 31 December 1999 amounted to £41 million, compared with net debt of £3 million at 31 December 1998 (1997: £1,290 million). Net funds at 31 December 1999 comprised cash and short-term investments of £609 million offset by gross debt of £568 million.

Reuters expects to be able to finance its current business plans from existing resources and facilities.

At 31 December 1999 Reuters Group PLC had syndicated loan facilities of £500 million available which expire in December 2002, all undrawn at 31 December 1999.

A Euro Commercial Paper Programme established in 1998 provides access to £1.5 billion in uncommitted short term finance, subject to market conditions. At 31 December 1999, Reuters had raised funds of £188 million under this programme, repayable at various dates through to April 2000.

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In 1998 Reuters also established a Euro Medium Term Note Programme which provides access to £1.0 billion of uncommitted finance, subject to market conditions. At 31 December 1999, Reuters had raised funds of £259 million under this programme, repayable at various dates from February 2001 up to November 2004.

7.  Treasury management

A substantial portion of Reuters revenue is committed under one and two-year contracts and approximately 80% is denominated in non-sterling currencies. Reuters also has significant costs denominated in foreign currencies with a different mix from revenue. Reuters profits are, therefore, exposed to currency fluctuations. The approximate proportion of operating profit excluding goodwill amortisation and currency gains attributable to each key currency group was as follows:

Sterling costs exceeded sterling revenues due to the level of UK-based marketing, development, operational and central management costs and depreciation which, with the exception of Instinet, is largely accounted for in sterling once an asset has been acquired.

In broad terms using the 1999 mix of profits, the impact of an additional unilateral 1% strengthening of sterling would have been a reduction of approximately £10 million on operating profits before hedging (1998: £9 million).

Sterling trade weighted
exchange rate index

Exchange rates had a small favourable impact on operating profits before hedging in 1999 compared with 1998.

The risk that sterling might strengthen against foreign currencies is hedged within parameters laid down by the Board. The priority in treasury policy is to reduce the risk of year on year earnings volatility to acceptable levels while allowing a degree of flexibility to take advantage of market movements.

The main principles underlying currency hedging policies are as follows:

The company has adopted value at risk (“VAR”) analysis as a means of quantifying the potential impact of exchange rate volatility on reported earnings. VAR is a measure of the potential loss on a portfolio within a specified time horizon, at a specified confidence interval. Loss is defined, in this instance, as the diminution in value of rolling 12-month forecast group profits denominated in sterling. Due to the approximations used in determining VAR, the theory provides order of magnitude estimates only but these are useful for comparison purposes.

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Operating profit sensitivity to
average based on VAR analysis

Reuters estimates that at 31 December 1999 there is a 5% chance that profits forecast for the coming 12 months will deteriorate by more than £52 million as a result of currency fluctuations before hedging and £27 million after hedging (1998: £70 million before hedging and £37 million after hedging). These figures represent the value at risk and are illustrated graphically above.

During 1999 the average value at risk on forecast profits for the coming 12 months was as follows:

The gains on currency hedging activities for the three years to December 1999 are summarised below:

Recognised currency hedging gains were lower in 1999 compared with 1998 due mainly to the relative strength of sterling versus other European currencies when hedging for 1999 was undertaken. Of the currency gains recognised in 1999, £6 million related to contracts in place at the end of 1998.

Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains and losses on instruments used for hedging, and the movements are set out below:

Unrecognised gains of £4 million at 31 December 1999 compare with unrecognised losses of £6 million at 31 December 1998. The improvement reflects the strength of sterling at the end of 1999 compared with the end of 1998.

Net cash flows are mainly converted into sterling and either applied to reduce debt or invested in money market instruments with financial institutions holding strong credit ratings. The maturity of investments and debt are matched to minimise interest rate risk.

Interest rates are managed using a mix of financial instruments which commence and mature at various dates through to November 2004. Most interest rate hedging relates to the use of interest rate swaps to shorten the interest rate profile on medium term fixed rate notes issued.

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