Reed Elsevier NV — H1 2011 Earnings Presentation
58 slides from Reed Elsevier NV's earnings presentation, 2011
Slide 1: Reed Elsevier Interim Results 2011
Reed Elsevier Interim Results 2011 Mark Armour, CFO Erik Engstrom, CEO
Slide 2: 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 19341934, as amended amended. These statements are subject to a number of risks and uncertainties that could caus
Slide 3: Mark Armour, CFO
Mark Armour, CFO 3
Slide 4: 2011 H1 performance
2011 H1 performance • Improved trading performance – Underlying revenue: +1% (+3% excluding biennial exhibitions cycling) – Underlying U d l i adjusted dj t d operating ti profit: fit +2% 2% • Reported revenue growth: sterling -3%; euro -3% – Lower revenue due to portfolio changes and weaker US doll
Slide 5: Adjusted profit and loss
Adjusted profit and loss 2011 2010 % % change 6 months to 30 June £m £m change constant Revenue 2,904 2,992 -3% -1% Adjusted j operating p g pprofit 774 758 +2% 2% +3% 3% Net interest expense (112) (134) Adjusted profit before tax 662 624 +6% +6% Tax (154) (140) Minority interests (2) (2) Adjusted n
Slide 6: Adjusted profit and loss
Adjusted profit and loss 2011 2010 % % change % change 6 months to 30 June £m £m change constant underlying Revenue 2,904 2,992 -3% -1% +1% Adjusted operating profit 774 758 +2% +3% +2% Adjusted operating margin 26 6% 25.3% 26.6% 25 3% 1 3%pts 1.3%pts 0 9%pts 0.9%pts 0 2%pts 0.2%pts • Underlying rev
Slide 7: Revenue: £2,904m
Revenue: £2,904m £m % change % change 6 months to 30 June 2011 constant underlying y g Reed Elsevier +2% +2% Business Information Reed 344 LexisNexis Risk Solutions +3% +4% Exhibitions Elsevier 368 961 LexisNexis Legal & 1% -1% +1% 1% Professional LexisNexis Reed eed Exhibitions b o s -3% 3% -4% % L
Slide 8: Adjusted operating profit: £774m
Adjusted operating profit: £774m £m % change % change 6 months to 30 June 2011 constant underlying y g Reed Business Elsevier +5% +4% Information Reed 53 Exhibitions LexisNexis Risk Solutions +5% +6% 113 LexisNexis Legal & Elsevier 4% -4% -2% 2% LexisNexis 343 Professional Legal & Professional 94 Re
Slide 9: Change in underlying revenue, cost, profit
Change in underlying revenue, cost, profit Adjusted Adjusted operating operating 6 months to 30 June 2011 Revenue cost profit Elsevier +2% +1% +4% LexisNexis Risk Solutions +4% +2% +6% LexisNexis Legal g & Professional +1% +1% -2% Reed Exhibitions -4% -2% -8% RBI +2% 0% +12% Reed Elsevier - underlyi
Slide 10: Adjusted operating cash flow
Adjusted operating cash flow 2011 2010 6 months th tto 30 JJune £ £m £ £m Adjusted operating profit 774 758 C Capital expenditure (1 ) (154) (13 ) (134) Depreciation 95 111 (59) (23) Workingg capital p and other items ((23)) 8 Adjusted operating cash flow 692 743 Cash flow conversion rate 89% 98% •
Slide 11: Adjusted profit and loss
Adjusted profit and loss 2011 2010 % % change 6 months to 30 June £m £m change constant Adjusted operating profit 774 758 +2% +3% Net interest expense (112) (134) Adjusted profit before tax 662 624 +6% +6% Tax (154) (140) Adjusted tax rate % 23.3% 22.5% Minority interests (2) (2) Adjusted profit att
Slide 12: Adjusted earnings per share
Adjusted earnings per share 6 months to 30 June 2011 2010 % 2011 2010 % Adjusted net profit: Reed Elsevier £506m £482m +5% €582m €554m +5% PLC (52.9%) £268m £255m +5% NV (50.0%) €291m €277m +5% Average number of shares: PLC (m) 1,201.5 1,198.6 0% NV (m) 735.1 734.4 0% Adjusted earnings per share: PL
Slide 13: Reported profit before tax
Reported profit before tax 2011 2010 % 6 months to 30 June £m £m change Adjusted profit before tax 662 624 +6% Adjustments Amortisation of acquired intangible assets (170) (172) Exceptional p restructuringg costs - ((13)) Acquisition integration costs (18) (24) Reclassification of tax in joint ventu
Slide 14: Free cash flow
Free cash flow 2011 2010 % 6 months to 30 June £m £m change Adjusted operating cash flow 692 743 -7% 7% Interest paid (102) (133) Tax ppaid ((104)) ((4)) Free cash flow before exceptional spend 486 606 Restructuring / acquisition integration* (46) (37) Free cash flow before dividends 440 569 -23% Or
Slide 15: Movement in net debt
Movement in net debt £m $m Net debt at 31 December 2010 (3,455) (5,387) Free cash flow post dividends 77 125 Acquisitions / disposals – Disposals 19 31 – Acquisitions (139) (226) (120) (195) Net proceeds from share options exercised / other 6 9 Currency translation 88 (21) Net debt at 30 June 2011 (
Slide 16: Balance sheet
Balance sheet 30 June 2011 31 Dec 2010 £m £m Goodwill & intangible assets 7,800 7,898 Tangible fixed assets 286 291 Investments & net assets held for sale 188 184 N t pensions Net i obligations bli ti (155) (170) Working capital (959) (1,000) Capital employed 7 160 7,160 7 203 7,203 Shareholders’ eq
Slide 17: Dividends
Dividends Reed Elsevier Reed Elsevier PLC NV 2011 g % change 2011 % change g Interim dividend 5.65p +5% €0.110 +1% LTM dividend cover 2 2x 2.2x 1 9x 1.9x • Difference in equalised dividend growth rates reflects changes in the euro:sterling exchange rate since prior year dividend announcement date –
Slide 18: Erik Engstrom, CEO
Erik Engstrom, CEO ero 18
Slide 19: Reed Elsevier: H1 2011
Reed Elsevier: H1 2011 • First half underlying growth in all businesses excluding cycling – Improving performance from large subscription and data businesses – Cyclical businesses recovering • Adjusted operating margin: +1.3% pts at 26.6% • Return to growth in adjusted earnings per share: +5% 19
Slide 20: Elsevier
Elsevier H1 2011 revenue 2011 2010 % change % change £m 6 months to 30 June £m £m constant underlying Revenue 961 955 +2% +2% Health Science & Science & Technology +4% +4% Sciences Technology 432 529 Health Sciences -1% 0% Adjusted operating profit 343 319 +5% +4% 64% electronic • Modest revenue gro
Slide 21: Elsevier: Science & Technology
Elsevier: Science & Technology H1 2011 revenue £529m Researchh R • Good G d growth th in i global l b l researchh activity ti it Growth +4% (journals) ― research spend Databases ― article submissions and tools • Budget environment varied by Reference/ customer and geography education Reference/ • St
Slide 22: Elsevier: Health Sciences
Elsevier: Health Sciences H1 2011 revenue £432m Medical research • Good growth; trends mirroring Growth 0% S&T research – growth in activity – budget environment varied Global International medical Clinical reference/ • Good growth in online revenues (other) research decision support moderated by fo
Slide 23: LexisNexis Risk Solutions
LexisNexis Risk Solutions 2011 2010 g % change % changeg 6 months to 30 June £m £m constant underlying Revenue 452 464 +3% +4% Adjusted operating profit 178 180 +5% +6% • Good growth in data and analytics across segments • Overall, well positioned for future growth • p Spend on new pproduct ppipelin
Slide 24: LexisNexis Risk Solutions
LexisNexis Risk Solutions Growth H1 2011 revenue £452m Insurance +7% 7% • Strong growth in data and analytics data & • New product pipeline analytics Screening Insurance 25% • Carriers deferring enterprise software -25% software spend Business Insurance data Services / & analytics Government +2% • U
Slide 25: LexisNexis Legal & Professional
LexisNexis Legal & Professional 2011 2010 % change % change 6 months to 30 June £m £m constant underlying Revenue 779 816 -1% +1% Adjusted operating profit 94 100 -4% -2% Adjusted operating margin 12.1% 12.2% • Returned to underlying revenue growth; continued recovery expected to be gradual • Margin
Slide 26: LexisNexis Legal & Professional
LexisNexis Legal & Professional Growth H1 2011 revenue £779m US law firms +1% • Market stabilised; recovery muted • New sales higher • Return to solid usage growth International US corporate, 0% • Corporate news and business (non US) government declines moderating (-7%) US law firms & academic d i •
Slide 27: Reed Exhibitions
Reed Exhibitions H1 2011 revenue 2011 2010 % change % change 6 months to 30 June £m £m constant underlying Ancillary Revenue 368 383 -3% -4% services Adjusted j operating p g pprofit 113 123 -7% -8% Delegates / sponsors Exhibitor space • Return to good growth: +10% excluding cycling; high customer s
Slide 28: Reed Exhibitions
Reed Exhibitions Growth ex cycling H1 2011 revenue £368m E rope Europe +7% • Growth Gro th rates varied aried bby co country ntr and sector – France recovered well; Spain still weak ROW North America +14% • Strong growth across sectors Europe – JCK (jewellery) at new venue – National Hardware: space
Slide 29: Reed Business Information
Reed Business Information 2011 2010 % change % change 6 months to 30 June £m £m constant underlying Revenue 344 374 -8% 8% +2% Adjusted operating profit 53 40 +32% +12% Adjusted operating margin 15 4% 10.7% 15.4% 10 7% • Turnaround progressing well • Underlying revenue returned to growth; trends lar
Slide 30: Reed Business Information
Reed Business Information Growth H1 2011 revenue £344m Major data +10% 10% • Strong growth in ICIS, Bankers services Almanac, XpertHR; RCD weakness • Expansion: CBI China (petrochemical/ Major j data energy) and Ascend (Aerospace) Other business services Major +7% • Strong growth in Totaljobs and ma
Slide 31: Reed Elsevier: In conclusion
Reed Elsevier: In conclusion H1 2011 • Growth trajectory improved • Large g subscription p and data revenues strengthened g and more cyclical y businesses recovered Outlook • Positive momentum across our businesses and focus on creating value • Continue to expect a gradual improvement in performance
Slide 32: Appendices
Appendices 32
Slide 33: Appendices index
Appendices index Financial information in Euros Further information 35 Adjusted profit and loss 48 Revenue (reconciliation) 36 Revenue and adjusted operating profit 49 Adjusted operating profit (reconciliation) 37 Adjusted operating cash flow 50 Reported net profit 38 Reported R t d profit fit befor
Slide 34: Financial information in Euros
Financial information in Euros 34
Slide 35: Adjusted profit and loss
Adjusted profit and loss 2011 2010 % % change 6 months th tto 30 JJune € €m € change €m h constant t t Revenue 3,340 3,441 -3% -1% Adjusted operating profit 890 872 +2% +3% Net interest expense (129) (154) Adjusted profit before tax 761 718 +6% +6% Tax (177) (161) Minority interests (2) (3) Adjusted
Slide 36: Revenue and adjusted operating profit
Revenue and adjusted operating profit Revenue Adjusted j operating p g pprofit €3,340m €890m Reed Reed Business Business Information Information Reed €61m Reed €396m Exhibitions Elsevier Exhibitions €130m €1,105m €423m LexisNexis Elsevier Legal & €394m Professional LLexisNexis i N i €108m Legal & Le
Slide 37: Adjusted operating cash flow
Adjusted operating cash flow 2011 2010 6 months th tto 30 JJune € €m € €m Adjusted operating profit 890 872 Capital expenditure (177) (154) Depreciation 109 128 (68) (26) Working capital and other items (26) 8 Adjusted operating cash flow 796 854 Cash flow conversion rate 89% 98% 37
Slide 38: Reported profit before tax
Reported profit before tax 2011 2010 % 6 months to 30 June €m €m change Adjusted profit before tax 761 718 +6% Adjustments Amortisation of acquired intangible assets (195) (198) Exceptional restructuring costs - (15) Acquisition related costs (21) (28) Reclassification of tax in joint ventures (8) (
Slide 39: Free cash flow
Free cash flow 2011 2010 % 6 months to 30 June €m €m change Adjusted operating cash flow 796 854 -7% Interest ppaid ((117)) ((153)) Tax paid (120) (4) Free cash flow before exceptional spend 559 697 Restructuring / acquisition integration* (53) (43) Free cash flow before dividends 506 654 -23% Ordin
Slide 40: Movement in net debt
Movement in net debt €m N t debt Net d bt att 31 December D b 2010 (4 043) (4,043) Free cash flow post dividends 89 Acquisitions / disposals – Disposals 22 – Acquisitions (160) (138) Net proceeds from share options exercised / other 7 Currencyy translation 306 Net debt at 30 June 2011 (3,779) 40
Slide 41: Balance sheet
Balance sheet 30 June 2011 31 Dec 2010 €m €m g assets Goodwill & intangible , 8,658 9,241 , Tangible fixed assets 317 341 Investments & net assets held for sale 209 215 Net pensions obligations (172) (199) Working capital (1,067) (1,171) Capital employed 7,945 8,427 Sh h ld ’ equity Shareholders’ it
Slide 42: Elsevier
Elsevier H1 2011 revenue €1,105m 2011 2010 % change h % change h 6 months to 30 June €m €m constant underlying Health Sciences Science & 497 Technology Revenue 1,105 1,098 +2% +2% 608 Adjusted operating profit 394 367 +5% +4% 42
Slide 43: LexisNexis Risk Solutions
LexisNexis Risk Solutions H1 2011 revenue €520m 2011 2010 % change h % change h Screening 6 months to 30 June €m €m constant underlying Business Insurance data Services / & analytics Revenue 520 534 +3% +4% other Adjusted operating profit 205 207 +5% +6% Government Insurance Software 43
Slide 44: LexisNexis Legal & Professional
LexisNexis Legal & Professional H1 2011 revenue €896m 2011 2010 % change % change 6 months to 30 June €m €m constant underlying y g International Revenue 896 938 -1% +1% (non US) US law firms Adjusted operating 108 115 -4% -2% US corporate, government & profit academic, other Adjusted operating 12.1
Slide 45: Reed Exhibitions
Reed Exhibitions H1 2011 revenue €423m 2011 2010 % change % change 6 months to 30 June €m €m constant underlying Ancillary services Delegates Revenue 423 441 -3% -4% / sponsors Exhibitor space Adjusted operating profit 130 142 -7% -8% 45
Slide 46: Reed Business Information
Reed Business Information H1 2011 revenue €396m 2011 2010 % change % change 6 months to 30 June €m €m constant underlying y g Major data Other business services Revenue 396 430 -8% +2% magazines/ i / services i Major marketing Adjusted operating 61 46 +32% +12% solutions profit Leading brands Adjust
Slide 47: Further information
Further information 47
Slide 48: Revenue
Revenue Reconciliation 6 months to 30 June £m % change €m % change 2010 Revenue 2,992 , 3,441 , Base businesses 32 +1% 37 +1% Acquisitions 13 0% 15 0% Disposals (69) -2% (79) -2% Currency effects (64) -2% (74) -2% 2011 Revenue 2,904 -3% 3,340 -3% 48
Slide 49: Adjusted operating profit
Adjusted operating profit Reconciliation 6 months to 30 June £m % change €m % change 2010 Adjusted operating profit 758 872 Base business 13 +2% 15 +2% Acquisitions / disposals 6 +1% 7 +1% Currency effects (3) -1% (4) -1% 2011 Adjusted operating profit 774 +2% 2% 890 +2% 2% 49
Slide 50: Reported net profit
Reported net profit 2011 2010 2011 2010 6 months to 30 June £m £m €m €m Adjusted net profit 506 482 582 554 Adjustments j (p (post tax)) Amortisation of acquired intangible assets (177) (193) (203) (222) E ceptional restructuring Exceptional restr ct ring costs - (9) - (10) Acquisition related costs
Slide 51: Dividend equalisation
Dividend equalisation Interim 2011 2010 % change Reed Elsevier PLC (p) 5.65 5.40 +5% UK tax credit rate 10% 10% Reed Elsevier PLC (p) (gross) 6.28 6.0 Equalisation ratio 1.538 1.538 Exchange rate (€:£) 1.14 1.18 Reed Elsevier NV (€) 0.110 0.109 +1% 51
Slide 52: Elsevier growth and currency analysis
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 2011 R Revenue +2% 0% +2% +1% -2% 2% +1% Adjusted operating profit +4% +1% +5% +4% -1% +8% Adj t d operating Adjusted ti marg
Slide 53: Reed Exhibitions: cycling impact
Reed Exhibitions: cycling impact Revenue growth % 2007 2008 2009 2010 H1 2011 Total +13% +9% -21% +9% -3% Impact of acquisitions / +1% -2%* +1% +1% +1% divestments Underlying +12% +11% -22% +8% -4% Impact of cycling shows 0% +7% -7% +11% -14% Underlying excluding cycling +12% +4% -15% -3% +10% *Bien
Slide 54: Currency profile
Currency profile Half year Full year Average rates for period: 2011 2010 2011* 2010 £ 2011 Adjusted profit before tax US dollar 1.62 1.53 1.62 1.55 Euro 1.15 1.15 1.14 1.17 € Sterling US dollar 1.41 1.33 1.42 1.32 19% Sterling 0.87 0.87 0.88 0.85 US dollar 33% 30 June 31 Dec 30 June Period end rates
Slide 55: Credit metrics
Credit metrics LTM 30 June 2011 LTM 31 Dec 2010 Net debt / ebitda 2.4x 2.5x Funds from operations / net debt 26.6% 31.3% R t i d cashh flow Retained fl / nett ddebt bt 19 5% 19.5% 18 4% 18.4% Net interest cover 6.1x 5.3x Long term credit rating BBB+ / Baa1 / A- BBB+ / Baa1 / A- (S&P/Moody’s/Fitch) P
Slide 56: Cost of borrowings
Cost of borrowings Debt ppredominantlyy denominated in US dollars at 30 June 2011 • 73% of gross debt (31 Dec 2010: 77%) • 87% of net debt (31 Dec 2010: 92%) Majority of debt fixed at 30 June 2011 • 66% of gross debt (31 Dec 2010: 73%) Blended interest rate on gross debt • 5.8% 5 8% estimated for fu
Slide 57: Term debt maturity profile
Term debt maturity profile $m 1,200 1,000 800 600 $1,014 $1,025 $950 400 $594 $643 $517 $551 200 $273 $286 $0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 >2020 Term debt stated at par value 57
Slide 58: Information for US institutions
Information for US institutions • Reed Elsevier PLC ADR (ticker: RUK) and Reed Elsevier NV ADR (ticker: ENL) traded on NYSE • 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 members