Reed Elsevier NV — FY2008 Earnings Presentation
31 slides from Reed Elsevier NV's earnings presentation, February 2009
Slide 1: Reed Elsevier Preliminary Results 2008 Highlights
Reed Elsevier Preliminary Results 2008 Highlights Strong 2008 financial performance Major reshaping of portfolio Restructuring programme expanded Reed Elsevier Preliminary Results 2008 Strong financial position Sir Crispin Davis Mark Armour 2
Slide 2: Strong 2008 financial performance; consistent strategy
Reed Elsevier Preliminary Results 2008 Strong 2008 financial performance Consistent strategy Delivering authoritative content through leading brands • 15% adjusted EPS growth at constant currencies • Good 6% revenue growth at Elsevier, LexisNexis and Reed Driving online workflow solutions Exhibition
Slide 3: Driving online workflow solutions; reshaping the portfolio
Reed Elsevier Preliminary Results 2008 Driving online workflow solutions $bn Reshaping the portfolio 2006 Adjusted operating profit 2008 Adjusted operating profit 2008 online growth +14% LexisNexis Elsevier LexisNexis Elsevier Harcourt Education Reed Business Reed Exhibitions Reed Business Reed Exhi
Slide 4: ChoicePoint acquisition; divestment of Reed Business Information
Reed Elsevier Preliminary Results 2008 ChoicePoint acquisition Divestment of Reed Business Information • Transforms Reed Elsevier position in Risk; $1.4bn leadership position • Terminated discussions in December 2008 • Overall revenues and operating profit up 4% – Judged not possible to structure tr
Slide 5: Restructuring programme; Elsevier
Reed Elsevier Preliminary Results 2008 Restructuring programme Elsevier Total Annual Savings $m (pre tax) Costs 2008 2009 2010 2011 February 2008 plan 290 30 100 160 200 • S&T: continued growth in scientific research output and usage Additional scope 60 1 30 40 50 – 98% subscription renewal rate, ar
Slide 6: Performance across cycle: LexisNexis
Reed Elsevier Preliminary Results 2008 Performance across cycle: LexisNexis Resilience of revenue streams Underlying • More challenging markets in US Law Year Growth % Drivers – Strong performance in online solutions in large law 2000 +8 – Slower growth in small law and marginal decline in corporate
Slide 7: Performance across cycle: Reed Exhibitions
Reed Elsevier Preliminary Results 2008 Performance across cycle: Reed Exhibitions Resilience of revenue streams Underlying Year Growth % Drivers • Strong 2008 performance Weak competitive positioning; revamp of product, – Good growth in annual shows and biennial shows cycling in 2000 +3 sales and ma
Slide 8: Performance across cycle: Reed Business Information
Reed Elsevier Preliminary Results 2008 Performance across cycle Reed Business Information Underlying Year Growth % Drivers 2000 +1 Good growth in annual shows offset by adverse • Increasing impact from economic downturn cycling – Downward trend accelerated in 4th quarter 2001 +7 Strong growth; benef
Slide 9: Performance across cycle; 2009 Outlook
Reed Elsevier Preliminary Results 2008 Performance across cycle 2009 Outlook Underlying • Elsevier: Strong subscription renewals, growing online Year Growth % Drivers sales, good publishing; pharma weak; $ strength impacting 2000 +5% US exports Strong advertising during dot.com boom 2001 -6% • Lexis
Slide 10: Conclusions
Reed Elsevier Preliminary Results 2008 Reed Elsevier conclusions Leading market positions Proprietary, must have content and solutions Continued investment behind online solutions Aggressive cost programme Highly cash generative; strong financial position Mark Armour, CFO 19
Slide 11: 2008 financial performance; adjusted profit and loss
Reed Elsevier Preliminary Results 2008 2008 financial performance Adjusted profit and loss Revenue +7%; Adjusted operating profit +12% 2008 2007 % change 12 months to 31 December £m £m constant • Good revenue and profit performance across Elsevier, LexisNexis and Reed Exhibitions; Reed Business Info
Slide 12: Revenue and adjusted operating profit by segment
Reed Elsevier Preliminary Results 2008 Revenue Adjusted operating profit 12 months to % change constant 12 months to % change constant £m 31 December 08 total underlying £m 31 December 08 total underlying Elsevier +4% +5% Elsevier +11% +10% LexisNexis +13% +5% LexisNexis +18% +10% 1,700 1,940 568 51
Slide 13: Elsevier and LexisNexis
Reed Elsevier Preliminary Results 2008 Elsevier LexisNexis 2008 2007 % change 2008 2007 % change 12 months to 31 December £m £m constant 12 months to 31 December £m £m constant Revenue 1,700 1,507 +4% Revenue 1,940 1,594 +13% Adjusted operating profit 568 477 +11% Adjusted operating profit 513 406 +
Slide 14: ChoicePoint proforma; Reed Exhibitions
Reed Elsevier Preliminary Results 2008 ChoicePoint proforma Reed Exhibitions Revenues Adjusted operating profit 2008 2007 Change 2008 2007 Change $m $m % $m $m % 2008 2007 % change Insurance 548 492 +11% 274 257 +7% 12 months to 31 December £m £m constant Screening & authentication 174 190 21 28 Rev
Slide 15: Business Information; adjusted operating cash flow
Reed Elsevier Preliminary Results 2008 Reed Business Information Adjusted operating cash flow 2008 2007 2008 2007 % change 12 months to 31 December £m £m 12 months to 31 December £m £m constant Adjusted operating profit 1,379 1,137 Revenue 987 906 +1% Capital expenditure (172) (145) Adjusted operati
Slide 16: Free cash flow; adjusted earnings and dividends
Reed Elsevier Preliminary Results 2008 Free cash flow Adjusted earnings and dividends % Reed Elsevier Reed Elsevier change PLC NV constant 2008 2007 % 12 months to 31 December £m £m change Adjusted EPS 44.6p +24% €0.87 +9% +15% Adjusted operating cash flow 1,407 1,108 +27% Equalised dividends: Inter
Slide 17: Balance sheet
Reed Elsevier Preliminary Results 2008 Balance sheet • Strongly cash flow generative; 102% cash flow conversion • Well spaced debt maturities • Refinancing of ChoicePoint acquisition facility on track – $1.6bn term debt issued in January 2009 – Further term debt issuance planned later in 2009 • Revo
Slide 18: Financial information in Euros: revenue and adjusted operating profit
Reed Elsevier Preliminary Results 2008 Revenue and adjusted operating profit Revenue €m Profit €m 2,142 2,444 716 646 891 1,244 230 159 Financial information in Euros 36
Slide 19: Adjusted profit and loss; Elsevier (euros)
Reed Elsevier Preliminary Results 2008 Adjusted profit and loss Elsevier % 2008 2007 2008 2007 change 2008 2007 2008 2007 % change 12 months to 31 December £m £m €m €m constant 12 months to 31 December £m £m €m €m constant Revenue 1,700 1,507 2,142 2,200 +4% Revenue 5,334 4,584 6,721 6,693 +7% Adjus
Slide 20: LexisNexis; Reed Exhibitions (euros)
Reed Elsevier Preliminary Results 2008 LexisNexis Reed Exhibitions 2008 2007 2008 2007 % change 2008 2007 2008 2007 % change 12 months to 31 December £m £m €m €m constant 12 months to 31 December £m £m €m €m constant Revenue 1,940 1,594 2,444 2,328 +13% Revenue 707 577 891 842 +9% Adjusted operating
Slide 21: Business Information; adjusted operating cash flow (euros)
Reed Elsevier Preliminary Results 2008 Reed Business Information Adjusted operating cash flow 2008 2007 2008 2007 2008 2007 2008 2007 % change 12 months to 31 December £m £m €m €m 12 months to 31 December £m £m €m €m constant Adjusted operating profit 1,379 1,137 1,737 1,660 Revenue 987 906 1,244 1,
Slide 22: Free cash flow
Reed Elsevier Preliminary Results 2008 Free cash flow % % 2008 2007 2008 2007 change change 12 months to 31 December £m £m €m €m £ € Adjusted operating cash flow 1,407 1,108 1,773 1,618 +27% +10% Interest paid (161) (148) (203) (216) Tax paid (247) (243) (311) (355) Free cash flow before dividends 9
Slide 23: Revenue and adjusted profit before tax reconciliation
Reed Elsevier Preliminary Results 2008 Revenue Adjusted profit before tax Reconciliation Reconciliation % % % % 12 months to 31 December £m change €m change 12 months to 31 December £m change €m change 2007 Revenue 4,584 6,693 2007 Adjusted profit before tax 998 1,457 Base businesses 197 +4% 288 +4%
Slide 24: Adjusted earnings per share; dividend equalisation
Reed Elsevier Preliminary Results 2008 Adjusted earnings per share Dividend equalisation 2008 2007 % 2008 2007 % Adjusted profit attributable for Interim Final total operations: % % Combined business £919m £852m +8% €1,159m €1,244m -7% 2008 2007 change 2008 2007 change Reed Elsevier PLC (52.9%) £486
Slide 25: Restructuring programme; reported profit attributable
Reed Elsevier Preliminary Results 2008 Restructuring programme: Reported profit attributable Restructuring costs (pre tax) 2008 2007 2008 2007 12 months to 31 December £m £m €m €m 2008 2009 Total Adjusted profit attributable 919 852 1,159 1,244 $m $m $m Adjustments (post tax) February 2008 plan (219
Slide 26: Return on invested capital: acquisitions and continuing
Reed Elsevier Preliminary Results 2008 Return on invested capital: Return on invested capital: Acquisitions 2006-2008 Reed Elsevier continuing (post tax) 2008 12.1% Revenue post-tax 12% 11.8% All major acquisitions, including: CAGR* return 11.0% 2006 Gold Standard, HESI, Dataflight, 13% 11% 11% 10.2
Slide 27: Return on invested capital; Elsevier growth and currency analysis
Reed Elsevier Preliminary Results 2008 Return on invested capital: Elsevier growth and currency analysis Reed Elsevier continuing (post tax) Year on year 2008 2007 Acquisitions/ Constant change in Other £m £m Organic disposals currency hedge rates currency Total Adjusted operating profit 1,379 1,137
Slide 28: Currency profile; balance sheet
Reed Elsevier Preliminary Results 2008 Currency profile Balance sheet Average rates for year: 2008 2007 2008 2007 2008 2007 £ £m £m €m €m US dollar 1.85 2.00 Goodwill & intangible assets 9,305 4,551 9,584 6,189 2008 Adjusted profit before tax Tangible fixed assets 329 239 339 325 Euro 1.26 1.46 € In
Slide 29: Movements in net debt; debt maturities
Reed Elsevier Preliminary Results 2008 Movements in net debt Debt maturities £m €m Term debt following January 2009 term debt issues Net debt at 31 December 2007 (492) (669) $m Free cash flow from continuing operations 999 1,259 2008 ordinary dividends (418) (528) Special distribution (net of paymen
Slide 30: Cost of borrowings; debt ratios
Reed Elsevier Preliminary Results 2008 Cost of borrowings Debt ratios 2008 2007 • 84% of gross debt denominated in $ (2007: 63%) Funds from operations / net debt 25% 32% – Increase due to ChoicePoint acquisition facilities • 52% (2007: 54%) of gross debt fixed at 31 December 2008; Retained cash flow
Slide 31: Information for US institutions
Reed Elsevier Preliminary Results 2008 Information for US institutions This presentation contains forward-looking statements within the meaning of Section 27A of the US Securities Act 1933, as amended, and Section 21E of • Reed Elsevier PLC ADR (ticker: RUK) and Reed the US Securities Exchange Act 1