Relx Plc · LSE:REL
Relx — Reed Elsevier — H1 2012 Earnings Presentation
34 slides from Relx's earnings presentation, 2012
Slide 1: Reed Elsevier Interim Results 2012
Reed Elsevier Interim Results 2012 Erik Engstrom, CEO Mark Armour, CFO Forward looking statements This presentation contains forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amende
Slide 2: 2012 H1 financial highlights
Mark Armour, CFO 3 2012 H1 financial highlights • Improved operating performance ― Underlying revenue +5% (+3% excluding exhibition cycling) ― Underlying adjusted operating profit +7% • Overall revenue growth: constant currencies +5%; sterling +5%; euro +12% • Adjusted operating margin +1.1%pts to 2
Slide 3: 2012 H1 financial highlights; Adjusted profit and loss
2012 H1 financial highlights • Strong cash flow conversion: 92% (94% last 12 months) • Good financial position ― Net debt/adjusted ebitda 2.3x (pension and lease adjusted) • Interim dividends: ― Reed Elsevier PLC +6% to 6.0p ― Reed Elsevier NV +18% to €0.130 5 Adjusted profit and loss % change 2012
Slide 4: Adjusted profit and loss; Revenue
Adjusted profit and loss 2012 2011 % change % change 6 months to 30 June £m £m % change constant underlying Revenue 3,053 2,904 +5% +5% +5% Adjusted operating profit 845 774 +9% +8% +7% Adjusted operating margin 27.7% 26.6% +1.1%pts +1.0%pts +0.6%pts • Underlying revenue +3% excluding exhibition cyc
Slide 5: Adjusted operating profit; Change in underlying revenue, cost, profit
Adjusted operating profit 2012 2011 % change % change 6 months to 30 June £m £m constant underlying Elsevier 352 343 +2% +4% LexisNexis Risk Solutions 191 178 +5% +5% LexisNexis Legal & Professional 100 94 +7% +2% Reed Exhibitions 151 113 +34% +30% Reed Business Information 63 53 +19% +10% Corporate
Slide 6: Adjusted earnings per share; Reported profit before tax
Adjusted earnings per share 6 months to 30 June 2012 2011 % 2012 2011 % Adjusted net profit: Reed Elsevier £561m £506m +11% €685m €582m +18% PLC (52.9%) £297m £268m +11% NV (50.0%) €343m €291m +18% Average number of shares: PLC (m) 1,203.7 1,201.5 0% NV (m) 735.7 735.1 0% Adjusted earnings per share
Slide 7: Adjusted operating cash flow; Free cash flow
Adjusted operating cash flow 2012 2011 6 months to 30 June £m £m Adjusted operating profit 845 774 Capital expenditure (150) (154) Depreciation 113 95 (37) (59) Working capital and other items (30) (23) Adjusted operating cash flow 778 692 Cash flow conversion rate 92% 89% • Capex 5% of H1 revenue;
Slide 8: Balance sheet; Movement in net debt
Balance sheet 30 June 2012 31 Dec 2011 £m £m Goodwill & intangible assets 8,201 8,223 Tangible fixed assets 266 288 Investments & net assets held for sale 222 215 Net pension obligations (396) (242) Working capital (1,049) (1,060) Capital employed 7,244 7,424 Shareholders’ equity 2,242 2,172 Net deb
Slide 9: Use of divestment proceeds; Impact of IAS 19 (revised)
Use of divestment proceeds • Gross proceeds of 2012 divestments to be used to buy back shares – Mitigating eps dilution from disposals • Gross cash proceeds of £158m/€193m to 30 June 2012 • On market purchases of Reed Elsevier PLC and Reed Elsevier NV shares • Ratio of purchases set by reference to
Slide 10: Dividends
Dividends Reed Elsevier Reed Elsevier PLC NV 2012 2011 % change 2012 2011 % change Interim dividend 6.0p 5.65p +6% €0.130 €0.110 +18% LTM dividend cover 2.2x 2.2x 2.0x 1.9x • Difference in dividend growth rates reflects changes in the euro:sterling exchange rate since prior year dividend announcemen
Slide 11: Reed Elsevier H1 2012 progress
Erik Engstrom, CEO 21 Reed Elsevier H1 2012 progress • Improving performance in difficult macroeconomic environment – Underlying revenue and profit growth in all five business areas • Continuing transformation of asset base and earnings quality – Organic development of digital platforms and new prod
Slide 12: Good H1 underlying revenue growth
Good H1 underlying revenue growth as reported, including biennial exhibition cycling +5% +1% +1% 2009 2010 2011 2012 H1 H1 H1 H1 -7% 23 Good H1 underlying revenue growth excluding biennial exhibition cycling +3% +3% 2009 2010 2011 2012 H1 H1 H1 H1 -1% -6% 24 12
Slide 13: Underlying adjusted operating profit growth; Adjusted EPS growth
Improvement in H1 underlying adjusted operating profit growth +7% +2% 2009 2010 2011 2012 H1 H1 H1 H1 -3% -8% 25 Strong H1 adjusted earnings per share growth Constant currency +10% +5% +1% 2009 2010 2011 2012 H1 H1 H1 H1 -14% 26 13
Slide 14: Further reduction in H1 net debt/EBITDA
Further reduction in H1 net debt/EBITDA 3.6x 2.7x 2.4x 2.3x 2009 2010 2011 2012 H1 H1 H1 H1 LTM to 30 June Pension and lease adjusted; 2009 H1 pro forma for ChoicePoint 27 This slide is intentionally left blank 28 14
Slide 15: Underlying H1 revenue and profit growth across five business areas
Underlying H1 revenue growth across all five business areas +1% Reed Business +23% Information +2% (+12%*) Reed Elsevier Exhibitions LexisNexis LexisNexis Legal & Risk Solutions Professional +1% +5% *excluding cycling 29 Underlying H1 adjusted operating profit growth across all five business areas +
Slide 16: Elsevier; LexisNexis Risk Solutions
Elsevier H1 underlying revenue growth • Unit volume growth in research across science and health, particularly in emerging markets; double digit growth in usage and submissions +3% • Strong revenue growth in databases and +2% +2% +2% tools • Double digit growth in electronic health 2009 2010 2011 20
Slide 17: LexisNexis Legal & Professional; Reed Exhibitions
LexisNexis Legal & Professional H1 underlying revenue growth • Good growth in new sales and usage of legal research in law firms and corporate customers • Double digit growth in online searches +1% • Print declines continue +1% • Development of digital platforms and new -2% products progressing well
Slide 18: Reed Business Information
Reed Business Information H1 underlying revenue growth • Major data services growing well; double digit growth in ICIS, Bankers Accuity, XpertHR; US construction market still soft • 2011 acquisitions performed well +2% +1% • Leading brands stable • Further disposals completed and 2009 2010 2011 2012
Slide 19: Full year outlook; Strategic direction
Reed Elsevier full year outlook • Macro economic environment remains uncertain • Based on H1 results, we expect to deliver underlying revenue and profit growth 37 Reed Elsevier strategic direction Where we are going • Deliver improved outcomes to professional customers • Combine content & data with
Slide 20: H1 progress - organic; H1 progress - portfolio
H1 progress - organic • Organic investment in transforming core businesses – Extended insurance workflow and corporate risk products on HPCC – Released new versions of Lexis Advance; positive customer reaction – Launched ClinicalKey strengthening online medical reference – Rolled out Nova technology
Slide 21: Changing revenue mix; Implications for business profile
Changing revenue mix Advertising declining as percentage of total revenues 14% 10% 8% 7% 6% 2008 FY 2009 FY 2010 FY 2011 FY 2012 H1 Print Electronic 41 Implications for Reed Elsevier business profile Improving quality of earnings • More predictable revenues – Transforming business mix by revenue typ
Slide 22: Appendices index
Appendices 43 Appendices index Financial information in Euros Further information 46 Adjusted profit and loss 55 Revenue: Reconciliation 47 Revenue 56 Adjusted operating profit: Reconciliation 48 Adjusted operating profit 57 Reported net profit 49 Reported profit before tax 58 Dividend equalisation
Slide 23: Financial information in Euros: Adjusted profit and loss
Financial information in Euros 45 Adjusted profit and loss % change 2012 2011 constant 6 months to 30 June €m €m % change currency Revenue 3,725 3,340 +12% +5% Adjusted operating profit 1,031 890 +16% +8% Net interest expense (131) (129) Adjusted profit before tax 900 761 +18% +11% Tax (212) (177) T
Slide 24: Revenue; Adjusted operating profit (euros)
Revenue 2012 2011 % change % change 6 months to 30 June €m €m constant underlying Elsevier 1,193 1,105 +2% +2% LexisNexis Risk Solutions 564 520 0% +5% LexisNexis Legal & Professional 952 896 -1% +1% Reed Exhibitions 593 423 +33% +23% Reed Business Information 423 396 +2% +1% Reed Elsevier 3,725 3,3
Slide 25: Reported profit before tax; Adjusted operating cash flow
Reported profit before tax 2012 2011 % 6 months to 30 June €m €m change Adjusted profit before tax 900 761 +18% Adjustments Amortisation of acquired intangible assets (203) (195) Acquisition related costs (10) (21) Reclassification of tax in joint ventures (1) (8) Disposals and other non-operating i
Slide 26: Free cash flow; Balance sheet
Free cash flow 2012 2011 6 months to 30 June €m €m % change Adjusted operating cash flow 949 796 +19% Interest paid (122) (117) Tax paid (154) (120) Free cash flow before exceptional spend 673 559 Restructuring / acquisition integration* (39) (53) Free cash flow before dividends 634 506 +25% Ordinar
Slide 27: Movement in net debt
Movement in net debt €m Net debt at 31 December 2011 (4,119) Free cash flow post dividends 174 Acquisitions / disposals – Acquisitions* (212) – Disposals* 151 (61) Net proceeds from share options exercised / other (9) Currency translation (99) Net debt at 30 June 2012 (4,114) *Net of cash tax paymen
Slide 28: Revenue and adjusted operating profit reconciliation
Revenue: Reconciliation 6 months to 30 June £m % change €m % change 2011 Revenue 2,904 3,340 Base businesses 139 +5% 159 +5% Acquisitions 80 +3% 92 +3% Disposals (80) -3% (92) -3% Currency effects 10 +0% 226 +7% 2012 Revenue 3,053 +5% 3,725 +12% 55 Adjusted operating profit: Reconciliation 6 months
Slide 29: Reported net profit; Dividend equalisation
Reported net profit 2012 2011 2012 2011 6 months to 30 June £m £m €m €m Adjusted net profit 561 506 685 582 Adjustments (post tax) Amortisation of acquired intangible assets (171) (177) (209) (204) Acquisition related costs (6) (12) (8) (14) Disposals and other 136 11 166 13 Deferred tax 45 49 55 57
Slide 30: Elsevier growth and currency analysis; Reed Exhibitions cycling impact
Elsevier growth and currency analysis Year on year Other Acquisitions/ Constant change in currency Underlying disposals currency hedge rates effects Total 6 months to 30 June 2012 Revenue +2% 0% +2% +1% -1% +2% Adjusted operating profit +4% -2% +2% +3% -2% +3% Adjusted operating margin +0.4% -0.3% +
Slide 31: Impact of IAS 19 (revised)
Impact of IAS 19 (revised) – effective 1 January 2013 (£) Adjusted earnings measures Reported figures Six months to 30 June 2012 Six months to 30 June 2012 Current Pro forma Revised Current Pro forma Revised IAS19 change IAS19 IAS19 change IAS19 £m £m £m £m £m £m Operating profit 845 (13) 832 670 (1
Slide 32: Currency profile; Credit metrics
Currency profile Half year Full year Average rates for period: 2012 2011 2012* 2011 £ 2012 Adjusted profit before tax US dollar 1.58 1.62 1.56 1.60 Euro 1.22 1.15 1.25 1.15 € US dollar 1.30 1.41 1.25 1.39 Sterling Sterling 0.82 0.87 0.80 0.88 US dollar 17% 33% 30 June 31 Dec 30 June Period end rates
Slide 33: Cost of borrowings; Term debt maturity profile
Cost of borrowings Debt predominantly denominated in US dollars at 30 June 2012 • 68% of gross debt (31 Dec 2011: 66%) • 74% of net debt (31 Dec 2011: 78%) Majority of debt fixed at 30 June 2012 • 64% of gross debt (31 Dec 2011: 69%) Blended interest rate on gross debt • 5.6% estimated for full year
Slide 34: Information for US institutions
Information for US institutions Reed Elsevier PLC ADR (ticker: RUK) and Reed Elsevier NV ADR (ticker: ENL) are NYSE-listed Each Reed Elsevier PLC ADR represents 4 Reed Elsevier PLC ordinary shares Each Reed Elsevier NV ADR represents 2 Reed Elsevier NV ordinary shares PLC and NV ADRs are mem