Reed Elsevier 2011 Results

16 February 2012

Reed Elsevier, the global professional information company, today issues its financial results for the year to 31 December 2011.

Financial highlights

  • Underlying revenue up 2% (3% excluding biennial exhibition cycling)
  • Underlying adjusted operating profit up 5%; up 4% at constant currencies
  • Adjusted EPS up 8% to 46.7p for Reed Elsevier PLC; up 6% to €0.83 for Reed Elsevier NV
  • Reported EPS up 19% to 32.4p for Reed Elsevier PLC; up 16% to €0.59 for Reed Elsevier NV
  • Full year dividend up 6% to 21.55p for Reed Elsevier PLC and €0.436 for Reed Elsevier NV
  • Net debt of £3.4bn; 2.3 times adjusted EBITDA (pensions and lease adjusted)

Commenting on the results, Anthony Habgood, Chairman, said:

“Reed Elsevier continued its positive momentum in 2011. All five business areas contributed to underlying revenue growth excluding biennial cycling. Underlying operating profits grew well, and we delivered a good increase in earnings per share. Our cash flow generation has allowed us to invest in our businesses, while maintaining a strong balance sheet and we are recommending a 6% increase in the full year dividend. Our Chief Executive has continued to reshape his team with several new management appointments and I am confident that our actions will continue to strengthen our long term growth prospects.”

Chief Executive Officer, Erik Engstrom, commented:

“2011 was a year of good progress both strategically and financially. Our large subscription and data businesses are performing well and uncertainty in the macro economic environment in the latter part of the year had only a limited impact on some of our more cyclical businesses. Organic development remains at the core of our strategy, and in 2011 we increased our investment and accelerated new product launches, focusing on the provision of information solutions that demonstrably improve the economics of our professional and business customers.

The increasing profitability of our business reflects a combination of our global operating approach, aiming to keep cost growth below revenue growth, and portfolio development. In 2011 we continued to sharpen our strategic focus, exiting a number of smaller businesses that are no longer aligned to our strategic direction and making bolt on acquisitions, principally in high growth data services.

The macro economic outlook remains uncertain, but by delivering highly valued products and services to our professional customers, and a relentless focus on process efficiency, we expect to deliver another year of underlying revenue and profit growth in 2012.”


FINANCIAL HIGHLIGHTS

Underlying revenue growth of 2% (3% excluding biennial cycling) was largely driven by strong performances from our core electronic subscription and transaction businesses. Total revenues, after acquisitions and disposals and currency translation effects, declined by 1% to £6,002m or 3% to €6,902m (2010: £6,055m/€7,084m).

Adjusted operating profits increased by 5% to £1,626m or 3% to €1,870m (2010: £1,555m/€1,819m); underlying growth, excluding acquisitions and disposals and currency translation effects, was 5%. The adjusted operating margin was up by 1.4 percentage points to 27.1%.

Interest costs reduced by 15% to £235m or 16% to €270m (2010: £276m/€323m) reflecting the strong free cash flow and term debt redemptions. Adjusted pre tax profits increased by 9% to £1,391m or 7% to €1,600m (2010: £1,279m/€1,496m).

The adjusted effective tax rate increased by 0.6 percentage points to 23.3% (2010: 22.7%).

Adjusted EPS was up 8% to 46.7p for Reed Elsevier PLC and up 6% to €0.83 for Reed Elsevier NV; up 6% at constant currencies. Reported earnings per share after amortisation of acquired intangible assets and acquisition related costs was up 19% to 32.4p for Reed Elsevier PLC and up 16% to €0.59 for Reed Elsevier NV. There were no exceptional restructuring costs in 2011.

The proposed full year dividends are up 6% to 21.55p (2010: 20.4p) for Reed Elsevier PLC and €0.436 (2010: €0.412) for Reed Elsevier NV.

Year end net debt was £3.4bn/€4.1bn (2010: £3.5bn/€4.0bn), 2.3 times adjusted EBITDA (pension and lease adjusted) with an adjusted operating cash flow conversion rate of 93%. Capital expenditure represented 6% of sales (2010: 5%).

Adjusted and underlying figures are supplemental performance measures used by management. Reconciliations between the reported and adjusted figures are set out in note 4 to the combined financial information on page 27. The reported operating profit figures are set out in note 2 on page 24. Unless otherwise indicated, all percentage movements in the following commentary refer to performance at constant exchange rates. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals made both in the year and prior year and assets held for sale. Constant currency growth rates are based on 2010 full year average and hedge exchange rates.


OPERATIONAL HIGHLIGHTS

Reed Elsevier

  • Good progress against strategic priorities; significant new product launches and improved business mix
  • Underlying revenue growth, excluding biennial exhibition cycling, in each of the five business areas for first time since 2007
  • Continued format transition; print down to 22% of revenue
  • Further portfolio development with expansion of online data services and exit from small businesses in all five business areas that are no longer aligned with our strategic direction
  • Outlook: Macro economic outlook remains uncertain, but by delivering highly valued products and services to our professional customers, and a relentless focus on process efficiency, we expect to deliver another year of underlying revenue and profit growth in 2012

Elsevier (47% of adjusted operating profit)

  • Underlying revenue growth +2% versus +2% in 2010
  • Science & Technology +4%, reflecting good growth in global research activity; Health Sciences flat with good growth in medical research and electronic solutions offset by print declines
  • Underlying operating profit +4%, reflecting increased efficiency
  • Outlook: Continued modest underlying revenue growth in 2012

LexisNexis Risk Solutions (22% of adjusted operating profit)

  • Underlying revenue growth +4%, with good growth in Insurance (+7%) and Business Services tempered by a slowdown in Screening in the second half and declines in federal government contracts
  • Underlying operating profit +12%, reflecting scale benefits and successful ChoicePoint integration
  • Outlook: Continued good underlying revenue growth in Insurance and Business Services; Screening and Government markets remain uncertain

LexisNexis Legal & Professional (14% of adjusted operating profit)

  • Underlying revenue growth resumed, +1% versus -2% in 2010
  • Underlying operating profit down 2%, with margin broadly flat at 14% in line with expectations, including higher investment
  • Significant progress in new product launch programme
  • Outlook: Legal markets remain stable but subdued, limiting revenue and margin growth potential in the short term

Reed Exhibitions (10% of adjusted operating profit)

  • Underlying revenues flat, but +10% excluding biennial cycling, with good growth across all major geographies
  • Underlying operating profit +2%
  • Accelerated new launch activity, 43 new shows in 2011, and selective acquisitions, increasing presence in faster growing sectors and geographies
  • Outlook: Positive impact from biennial cycling in 2012; good momentum in annual shows, but some signs of market softness in Europe

Reed Business Information (7% of adjusted operating profit)

  • Underlying revenue growth restored to +1% following 3 years of decline
  • Underlying operating profit +15%; margin +3.4 percentage points to 15.8%
  • Portfolio rebalanced towards data services, driven by organic growth and acquisitions of Accuity,
  • CBI China and Ascend
  • Outlook: Good growth in core data services businesses offset by softness in print advertising


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