Reed Elsevier NV — FY2009 Earnings Presentation
34 slides from Reed Elsevier NV's earnings presentation, February 2010
Slide 1: Reed Elsevier Results 2009
Reed Elsevier Results 2009 Erik Engstrom, CEO Mark Armour, CFO This presentation contains forward-looking statements within the meaning of Section 27A of the US Securities Act 1933, as amended, and Section 21E of the US Securities Exchange Act 1934, as amended. These statements are subject to a numb
Slide 2: 2009 performance highlights
Mark Armour, CFO 3 2009 performance highlights Revenue £6,071m +14%; adjusted operating profit £1,570m +14%; adjusted operating margin 25.9% • Core professional information revenues relatively robust • Advertising and promotion markets impacted by global recession • Excellent first year profit growt
Slide 3: Adjusted profit and loss
Adjusted profit and loss 2009 2008 % % change Year to 31 December £m £m change constant Revenue 6,071 5,334 +14% 0% Adjusted operating profit 1,570 1,379 +14% +1% Net interest expense (291) (174) Adjusted profit before tax 1,279 1,205 +6% -6% Tax a (293) (282) Minority interests (4) (4) Adjusted pro
Slide 4: Revenue and adjusted operating profit
Revenue: £6,071m % change % change Year to 31 December 2009 constant underlying £m Elsevier +4% +4% LexisNexis +14% -4% 1,985 2,557 Reed Exhibitions -21% -22% 891 Reed Business Information -18% -18% 638 Reed Elsevier 0% -6% LexisNexis: before directory listings revenue recognition change -3% 7 Adjus
Slide 5: Change in underlying revenue, cost, profit; restructuring programmes
Change in underlying revenue, cost, profit Adjusted Adjusted operating operating Year to 31 December 2009 Revenue cost profit El i Elsevier +4% 4% +1% 1% +9% 9% LexisNexis -4% -1% -15% Reed Exhibitions -22% -18% -31% Reed Business Information -18% -15% -34% R d Elsevier Reed El i -6% 6% -5% 5% -9% 9
Slide 6: ChoicePoint acquisition (pro forma); adjusted operating cash flow
ChoicePoint acquisition (pro forma) Revenues Adjusted operating profit 2009 2008 % 2009 2008 % Year to 31 December $m $m change $m $m change Insurance 606 553 +10% 317 274 +16% Non-Insurance 311 359 -13% 56 45 +24% Corporate/shared - - (56) (99) ChoicePoint 917 912 +1% 317 220 +44% • Strong insuranc
Slide 7: Capital expenditure; adjusted profit and loss
Capital expenditure % of 2009 2009 2008 Year to 31 December revenues £m £m Elsevier 4% 73 56 LexisNexis 6% 140 79 Reed Exhibitions 2% 10 11 Reed Business Information 2% 19 26 Total 4% 242 172 • Full year of ChoicePoint • Increasing investment in product platforms and infrastructure, particularly in
Slide 8: Adjusted earnings per share; statutory profit before tax
Adjusted earnings per share Year to 31 December 2009 2008 % 2009 2008 % Adjusted profit attributable: Reed Elsevier £982m £919m +7% €1,099m €1,159m -5% PLC (52.9%) £519m £486m +7% NV (50.0%) €550m €580m -5% Average number of shares: PLC (m) 1,131.4 1,089.5 +4% NV (m) 693.9 669.0 +4% Adjusted earning
Slide 9: Free cash flow; movement in net debt
Free cash flow 2009 2008 % Year to 31 December £m £m change Adjusted operating cash flow 1 558 1,558 1 407 1,407 +11% Interest paid (293) (161) Tax paid (214) (247) Free cash flow before dividends 1,051 999 +5% Ordinary dividends (457) (418) R t t i expense/acquisition Restructuring / i iti iintegra
Slide 10: Credit metrics; balance sheet
Credit metrics LTM 31 December 2009 LTM 30 June 2009 Net debt / EBITDA 2.9x 3.6x Funds from operations / net debt 28.9% 21.0% Retained cash flow / net debt 17.7% 13.6% Net interest cover 5.0x 5.5x Longg term credit ratingg BBB+ / Baa1 / A- BBB+ / Baa1 / A- Long term target range of 2-3x net debt / e
Slide 11: Post tax return on invested capital; dividends
Post tax return on invested capital 2009 2008 £m £m Taxed adjusted operating profit 1 210 1,210 1 056 1,056 Average invested capital at average exchange rates 11,609 8,747 Return on average invested capital 10.4% 12.1% • Initial dilutive effect of ChoicePoint acquisition • Lower underlying adjusted
Slide 12: Reed Elsevier: 2009 results and outlook
Erik Engstrom, CEO 23 Reed Elsevier 2009 results relatively robust in difficult year for our customers As expected, business trends continuing; 2010 sees late cycle effects Long term outlook positive • Good long term growth markets • High quality assets 24 12
Slide 13: Elsevier; Elsevier: Science & Technology
Elsevier 2009 revenue £1,985m 2009 2008 % change % change £m £m constant underlying Revenue 1,985 1,700 +4% +4% Science & Health Technology Sciences 985 1,000 Science & Technology +5% +5% Health Sciences +3% +3% Adjusted operating profit 693 568 +9% 9% +9% 9% • Most customer markets had challenging
Slide 14: Elsevier: Science & Technology outlook; Health Sciences
Elsevier: Science & Technology Outlook Near term • Academic budget environment remains difficult, geographic differences • Renewals for 2010 handled on customer byy customer basis • Overall subscription spend growth moderated Longer term Growth drivers expected to remain strong • Growth in research
Slide 15: Elsevier: Health Sciences outlook; LexisNexis
Elsevier: Health Sciences Outlook Near term • Good growth in electronic reference, clinical decision support and nursing and health professional education • Weakness in pharma promotion Longer term Strong market growth drivers • Favourable demographics (ageing populations) in developed countries • R
Slide 16: LexisNexis: Legal
LexisNexis: Legal 2009 2009 revenues £1,692m US Law firm 0% • Core law firm revenues held up Growth -5%* markets – Slightly weaker transactional and subscription p revenues – Growth in litigation and other law firm services International Law firm markets US directory -37%* • Shift away from print li
Slide 17: LexisNexis: Legal priorities; Risk Solutions
LexisNexis: Legal priorities Increase spend on product development, sales and marketing • Expand sales coverage and marketing programmes Î Increased market presence and foundation for future growth Deliver progressive new product introductions • Next generation platform: two years into multi-year de
Slide 18: LexisNexis: Risk Solutions; Reed Exhibitions
LexisNexis: Risk Solutions Outlook Near term • Growth in insurance usage and revenues continue • Declines in cyclical businesses expected to moderate L Longer tterm Fundamentals F d t l strong t • Insurance: policy churn driven by insurer competition and more quotes • Commercial and government marke
Slide 19: Reed Exhibitions outlook; Reed Business Information
Reed Exhibitions Outlook Near term • Low visibility in advance bookings, exhibitors still committing later • 2010 benefit of net cycling in of biennial shows Longer term Fundamentals sound • Face to face important part of marketing mix • High growth in developing economies and key sectors • Reed Exh
Slide 20: Reed Business Information outlook; different top priorities
Reed Business Information Outlook • Print advertisingg structurallyy challenged; g ; online expected p to recover • Data services to see continued growth Priorities Focus on value creation • Continue to restructure advertising based portfolio • Realign cost base to lower revenues • Grow data service
Slide 21: Pragmatic approach; Reed Elsevier: in conclusion
Pragmatic approach 1. Differentiate between businesses 2. Prioritise high growth markets, good returns 3. Focus on customer value and improved outcomes 4 Relentless pursuit of process innovation 4. innovation, service quality and cost efficiency 5. Business by business metrics driven approach to dri
Slide 22: Appendices index
Appendices 43 Appendices index Financial information in Euros Further information 46 Adjusted profit and loss 59 Revenue (reconciliation) 47 Revenue and adjusted operating profit 60 Adjusted operating profit (reconciliation) 48 Adjusted operating cash flow 61 Adjusted profit before tax (reconciliati
Slide 23: Financial information in Euros: adjusted profit and loss
Financial information in Euros 45 Adjusted profit and loss 2009 2008 % % change Year to 31 December €m €m change constant Revenue 6 800 6,800 6 721 6,721 +1% 0% Adjusted operating profit 1,758 1,737 +1% +1% Net interest expense (326) (219) Adjusted profit before tax 1,432 1,518 -6% -6% Tax (329) (35
Slide 24: Revenue and adjusted operating profit; operating cash flow (euros)
Revenue and adjusted operating profit Revenue Adjusted operating profit €6,800m €1,758m 2,223 2,864 776 745 998 715 99 170 47 Adjusted operating cash flow 2009 2008 2009 2008 Year to 31 December £m £m €m €m Adjusted j operating p g pprofit 1,570 , 1,379 , , 58 1,758 1,737 , 3 Capital expenditure (24
Slide 25: Capital expenditure; statutory profit before tax
Capital expenditure % of 2009 2008 2009 2008 Year to 31 December revenue £m £m €m €m Elsevier 4% 73 56 82 71 LexisNexis 6% 140 79 157 99 Reed Exhibitions 2% 10 11 11 14 Reed Business Information 2% 19 26 21 33 Total 4% 242 172 271 217 €17m (2008:€9m) corporate capital expenditure allocated (principa
Slide 26: Free cash flow; movement in net debt
Free cash flow 2009 2008 % Year to 31 December €m €m change Adjusted operating cash flow 1,745 1,773 -2% 2% Interest paid (328) (203) Tax paid (240) (311) Free cash flow before dividends 1,177 1,259 -7% Ordinary dividends (512) (528) Restructuring expense/acquisition integration* (150) (107) Free ca
Slide 27: Balance sheet; Elsevier
Balance sheet 2009 2008 2009 2008 £m £m €m €m Goodwill & intangible assets 7,971 9,305 8,928 9,584 Tangible fixed assets 292 329 327 339 I Investments t t & nett assets t hheld ld for f sale l 176 241 197 248 Net pensions obligations (235) (369) (263) (380) Working capital (857) (832) (960) (857) Ca
Slide 28: LexisNexis; Reed Exhibitions
LexisNexis 2009 revenue €2,864m 2009 2008 % change % change €m €m constant underlying Risk Solutions 969 US Legal 1,261 Revenue 2,864 2,444 +14% -4% International Legal g Adjusted operating profit 745 646 +13% -15% 634 55 Reed Exhibitions 2009 revenues €715m 2009 2008 % change % change Ancillary €m
Slide 29: Reed Business Information; further information
Reed Business Information Revenue €998 2009 2008 % change % change Subscription €m €m constant underlying and circulation / other Advertising Revenue 998 1,244 -18% -18% Data Adjusted operating profit 99 159 -35% -34% services 57 Further information 58 29
Slide 30: Revenue and adjusted operating profit reconciliation
Revenue Reconciliation Year to 31 December £m % change €m % change 2008 Revenue 5,334 6,721 Base businesses (333) -6% (419) -6% Acquisitions 382 +7% 482 +7% Disposals (32) -1% (40) -1% Currency effects 720 +14% 56 +1% 2009 Revenue 6,071 +14% 6,800 +1% 59 Adjusted operating profit Reconciliation Year
Slide 31: Adjusted profit before tax; dividend equalisation
Adjusted profit before tax Reconciliation Year to 31 December £m % change €m % change 2008 Adjusted profit before tax 1,205 1,518 Base business (111) -9% (139) -9% Acquisitions/disposals 38 +3% 47 +3% Currency effects 147 +12% 6 0% 2009 Adjusted profit before tax 1,279 +6% 1,432 -6% 61 Dividend equa
Slide 32: Statutory profit attributable; return on invested capital
Statutory profit attributable 2009 2008 2009 2008 Year to 31 December £m £m €m €m Adjusted profit attributable 982 919 1,099 1,159 Adj Adjustments ((post tax)) Amortisation of intangible assets (411) (318) (460) (401) Impairment of acquired intangible assets / goodwill (136) (9) (152) (11) Restructu
Slide 33: Currency profile; cost of borrowings
Currency profile Average rates for year: 2009 2008 2009 Adjusted profit before tax £ US dollar 1.57 1.85 Euro 11.12 12 11.26 26 € Sterling 17% US dollar 1.40 1.47 Sterling 0.84 0.79 US dollar 42% Year end rates: 2009 2008 Euro £ 33% US dollar 1.62 1.45 Other E Euro 11.12 12 11.03 03 8% € US dollar 1
Slide 34: Debt maturities; information for US institutions
Debt maturities Term debt maturities well spaced $m 1,600 1,400 1,200 1,000 800 $1,512 600 $1,185 $1,020 400 $706 $563 $647 $522 200 $263 $187 $3 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 >2019 Term debt translated at 31 December 2009 exchange rates 67 Information for US institutions • Reed Els