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HIGHLIGHTS
- Strong financial performance for 2007, good momentum and significant plans to accelerate growth
- Major reshaping of portfolio
- Sale of Harcourt Education now completed
- Planned divestment of Reed Business Information
- Significant restructuring programme around a more cohesive business delivering important cost efficiencies
- Agreed £2.1 billion/€2.8 billion acquisition of ChoicePoint, Inc separately announced today
Strong financial performance
• Underlying revenue growth +6%, driven by good growth in online information and workflow solutions; reported revenues of £4,584m/€6,693m, up 2% and 1% respectively in sterling and euros
• Adjusted operating margin +80 basis points (underlying +100 basis points), from good revenue growth and ongoing cost initiatives
• Adjusted earnings per share +12% at constant currencies; at reported rates up 7% to 35.9p for Reed Elsevier PLC and up 5% to €0.80 for Reed Elsevier NV
• US dollar decline adversely affects growth rates on translation at reported exchange rates
Major reshaping and strengthening of portfolio
• Sale of Harcourt Education for £2.5bn/€3.6bn successfully completed with substantial gain; net proceeds distributed to shareholders in January 2008
• Reed Business Information to be divested, reducing exposure to advertising markets and cyclicality
• Acquisition of ChoicePoint, Inc (2007 revenues £491m/€717m) significantly expands position in fast growing risk management marketplace
• More cohesive and synergistic business with stronger growth prospects
Major restructuring to accelerate growth
• Further consolidation and streamlining of operational activities and back office support in a more integrated company
• Significant savings of £245m/€335m over 2008-2011 with annual savings targeted of £100m/€135m by 2011, over and above normal expected margin improvement
• Exceptional costs of approximately £140m/€190m; cash payback in 2.5 years
Reed Elsevier’s Chief Executive Officer, Sir Crispin Davis, commented:
“We have made good progress over the last year. Investment against our online growth and workflow solutions strategy is paying off with good revenue momentum. Together with our cost initiatives, this is driving underlying margin improvement and a strong earnings performance. The decline of the US dollar takes some shine off the earnings performance expressed in sterling and euros, but the strength of the underlying growth is very encouraging with 2007 representing the highest constant currency earnings growth of the last ten years.
“The sale of Harcourt Education has moved us towards a more consistent, cohesive and synergistic business and today we have announced a further major step with the planned divestment of Reed Business Information (“RBI”). RBI is a well-managed high quality business as evidenced by the success of its online growth and the control of costs. Its advertising revenue model and the inherent cyclicality fit less well however with the subscription-based information and workflow solutions focus of Reed Elsevier’s strategy.
“The move to a more cohesive portfolio provides us with the opportunity to accelerate progress in consolidating and streamlining our technology, operations and back office support. In doing so, Reed Elsevier becomes a more integrated company with significant savings in cost structure. The restructuring plan announced today has an attractive payback and will make a meaningful addition to margin and earnings growth.
“The acquisition of ChoicePoint represents a major further step in the building of our risk management business and in the development of Reed Elsevier’s online workflow solutions strategy. The market growth in risk information and analytics is highly attractive and ChoicePoint brings important assets and market positions that fit well with our existing business and, in combination, can be leveraged to very good effect.
“ChoicePoint’s insurance business in particular has seen strong consistent growth, and through the combination of ChoicePoint’s highly regarded data and analytics assets and our leading LexisNexis risk technology, we can further develop compelling offerings for customers and realise significant synergy benefits. The acquisition will accelerate Reed Elsevier’s revenue and profit growth and deliver a good and growing return on capital.
“The outlook for Reed Elsevier is very positive. We are well positioned in attractive markets; the momentum in the business is showing through in the good financial performance; and the changes we are making will strengthen the business and accelerate our growth.”
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