Relx Plc · LSE:REL
Relx — Reed Elsevier — FY2011 Earnings Presentation
35 slides from Relx's earnings presentation, February 2012
Slide 1: Reed Elsevier Results 2011
Reed Elsevier Results 2011 Erik Engstrom, CEO Mark Armour, 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 amended
Slide 2: 2011 Financial highlights
Mark Armour, CFO 3 2011 Financial highlights • Improved operating performance – underlying revenue +2% (+3% excluding exhibition cycling) – underlying adjusted operating profit +5% • Adjusted operating margin +1.4%pts to 27.1% • Adjusted eps growth: – Reed Elsevier PLC +8% to 46.7p – Reed Elsevier N
Slide 3: 2011 Financial highlights; Adjusted profit and loss
2011 Financial highlights • Strong cash flow conversion: 93% • Full year dividends +6%: – Reed Elsevier PLC 21.55p – Reed Elsevier NV €0.436 • Good financial position – net debt/adjusted ebitda 2.3x 2 3x (pension and lease adjusted) • Return on invested capital +0.6%pts to 11.2% 5 Adjusted profit an
Slide 4: Adjusted profit and loss; Revenue
Adjusted profit and loss 2011 2010 % change % change Year to 31 December £m £m % change constant underlying Revenue 6,002 6,055 -1% 0% +2% Adjusted operating profit 1,626 1,555 +5% +4% +5% Adjusted operating margin 27.1% 25.7% +1.4pts +1.0pts +0.9pts • Underlying revenue growth, excluding biennial e
Slide 5: Adjusted operating profit; Change in underlying revenue, cost, profit
Adjusted operating profit 2011 2010 % change % change Year to 31 December £m £m constant underlying Elsevier 768 724 +3% +4% LexisNexis Risk Solutions 362 354 +6% +12% LexisNexis Legal & Professional 229 238 -4% -2% Reed Exhibitions 167 158 +4% +2% Reed Business Information 110 89 +22% +15% Unalloca
Slide 6: Adjusted earnings per share; Reported profit before tax
Adjusted earnings per share Year to 31 December 2011 2010 % 2011 2010 % Adjusted net profit: Reed Elsevier , £1,060m £983m +8% €1,219m , €1,150m , +6% PLC (52.9%) £561m £520m +8% NV (50.0%) €610m €575m +6% Average number of shares: PLC (m) 1,202.0 1,199.1 0% NV (m) 735.3 734.5 0% Adjusted earnings p
Slide 7: Adjusted operating cash flow; Capital expenditure
Adjusted operating cash flow 2011 2010 Year to 31 December £m £m Adjusted operating profit 1,626 1,555 Capital expenditure (350) (311) Depreciation 207 237 (143) (74) Working capital and other items 32 38 Adjusted operating cash flow 1,515 1,519 Cash flow conversion rate 93% 98% 13 Capital expenditu
Slide 8: Free cash flow; Movement in net debt
Free cash flow 2011 2010 Year to 31 December £m £m Adjusted operating cash flow 1,515 1,519 Interest paid (235) (287) Tax paid (218) (101) Free cash flow before exceptional spend 1,062 1,131 Restructuring/acquisition integration* (85) (108) Free cash flow before dividends 977 1,023 Ordinary dividend
Slide 9: Balance sheet; Post tax return on invested capital
Balance sheet 2011 2010 £m £m Goodwill & intangible assets 8,223 7,898 Tangible fixed assets 288 291 Investments & net assets held for sale 215 184 Net pension obligations (242) (170) Working capital (1,060) (1,000) Capital employed 7,424 7,203 Shareholders’ equity 2,172 1,943 Net debt 3,433 3,455 C
Slide 10: Dividends
Dividends Reed Elsevier Reed Elsevier PLC NV Equalised dividends: I t i di Interim dividend id d 5 65 5.65p +5% 5% €0 110 €0.110 +1% 1% Final dividend (proposed) 15.90p +6% €0.326 +8% Total 21.55p +6% €0.436 +6% Dividend cover 2.2x 1.9x • Differences in dividend growth rates reflect changes in the e
Slide 11: Erik Engstrom, CEO: 2011
Erik Engstrom, CEO 21 2011 • Improvement in operating performance • Significant strategic progress 22 11
Slide 12: Underlying revenue and adjusted operating profit growth
Underlying revenue growth excluding biennial exhibition cycling +6% +4% +3% +1% 2007 2008 2009 2010 2011 -5% 23 Underlying adjusted operating profit growth +10% +9% +5% 2007 2008 2009 2010 2011 -1% -9% 24 12
Slide 13: Return on invested capital; Net debt/EBITDA
Return on invested capital 11.8% 12.1% 11 2% 11.2% 10.4% 10.6% 2007 2008 2009 2010 2011 25 Net debt/EBITDA 3.3x 2.9x 2.5x 2.2x 2.3x 2007 2008 2009 2010 2011 Pension and lease adjusted; calculated in US dollars; 2007 pro forma for special distribution; 2008 pro forma for ChoicePoint acquisition 26 13
Slide 14: Format transition; Geographic evolution
Format transition 2006 2011 Print 22% Electronic Print 37% 51% Face to face Electronic 15% 63% Face to face 12% 27 Geographic evolution Percent of revenues outside North America & Europe 17% 12% 2006 2011 28 14
Slide 15: Reed Elsevier strategic priorities
Reed Elsevier strategic priorities Environment Global professional employment growing across industries; information sources and data volumes multiplying; technology evolving Strategic priorities • Serve professional customers in information intensive industries • Deliver demonstrably improved outco
Slide 16: Elsevier
Elsevier Market growth and position Good long term growth in research activity and healthcare spending – Global #1 Strategic priorities • Improve research outcomes and productivity for researchers and their managers through expanded content and integrated analytics & technology platforms • Drive rem
Slide 17: LexisNexis Risk Solutions
LexisNexis Risk Solutions Market growth and position Risk information and analytics increasing in importance and value – #1 in key verticals Strategic priorities • Drive growth in insurance through new product pipeline that improves carrier economics across workflows • LLeverage database d t b andd
Slide 18: LexisNexis Legal & Professional
LexisNexis Legal & Professional Market growth and position Long term growth in litigation, regulation, international legal - #2 US, #1/#2 non-US Strategic priorities • Progressively introduce next generation products • Leverage platform globally to drive P to E migration and long term international
Slide 19: Reed Exhibitions
Reed Exhibitions Market growth and position Long term global growth market through economic cycles - Global #1 Strategic priorities • Drive organic growth by leveraging global sector groups and technology platforms • Prioritise faster growing geographies and sectors through launches and small acquis
Slide 20: Reed Business Information
Reed Business Information Market growth and position Long term growth in data intensity in many industries - #1 in select niche markets Strategic priorities • Drive expansion in global data services organically and through acquisition • Reshape portfolio through organic transformation and selective
Slide 21: Reed Elsevier strategic direction; Summary
Reed Elsevier strategic direction Where we are going • Deliver improved outcomes to professional customers • Combine content & data with technology in global platforms • Leverage institutional skills, assets and resources across Reed Elsevier How we are getting there • Organic investment in transfor
Slide 22: Appendices index
Appendices 43 Appendices index Financial information in Euros Further information 46 Adjusted profit and loss 58 Revenue (reconciliation) 47 Adjusted profit and loss 59 Adjusted operating profit (reconciliation) 48 Revenue 60 Reported net profit 49 Adjusted operating profit 61 Post tax return on inv
Slide 23: Financial information in Euros: Adjusted profit and loss
Financial information in Euros 45 Adjusted profit and loss % change 2011 2010 constant Year to 31 December €m €m % change currency R Revenue 6 902 6,902 7 084 7,084 -3% 3% 0% Adjusted operating profit 1,870 1,819 +3% +4% Net interest expense (270) (323) Adjusted profit before tax 1,600 1,496 +7% +7%
Slide 24: Adjusted profit and loss; Revenue (euros)
Adjusted profit and loss 2011 2010 % change % change Year to 31 December €m €m % change constant underlying Revenue 6,902 7,084 -3% 0% +2% Adjusted operating profit 1,870 1,819 +3% +4% +5% Adjusted operating margin 27.1% 25.7% +1.4pts +1.0pts +0.9pts • Underlying revenue growth, excluding biennial e
Slide 25: Adjusted operating profit; Reported profit before tax (euros)
Adjusted operating profit 2011 2010 % change % change Year to 31 December €m €m constant underlying Elsevier 883 847 +3% +4% LexisNexis Risk Solutions 416 414 +6% +12% LexisNexis Legal & Professional 263 279 -4% -2% Reed Exhibitions 192 185 +4% +2% Reed Business Information 127 104 +22% +15% Unalloc
Slide 26: Adjusted operating cash flow; Capital expenditure (euros)
Adjusted operating cash flow 2011 2010 Year to 31 December €m €m Adjusted j operating p g pprofit ,8 0 1,870 1,819 ,8 9 Capital expenditure (403) (364) Depreciation 238 277 (165) (87) Working capital and other items 37 45 Adjusted operating cash flow 1,742 1,777 Cash flow conversion rate 93% 98% 51
Slide 27: Free cash flow; Movement in net debt (euros)
Free cash flow 2011 2010 Year to 31 December €m €m Adjusted operating cash flow 1,742 1,777 Interest paid (270) (336) Tax paid (251) (118) Free cash flow before exceptional spend 1,221 1,323 Restructuring / acquisition integration* (98) (127) Free cash flow before dividends 1,123 1,196 Ordinary divi
Slide 28: Balance sheet (euros)
Balance sheet 2011 2010 €m €m Goodwill & intangible assets 9,867 9,241 Tangible fixed assets 346 341 I Investments t t & nett assets t hheld ld for f sale l 258 215 Net pensions obligations (290) (199) Working capital (1,271) (1,171) Capital employed 8,910 8,427 Shareholders’ equity 2,606 2,273 Net
Slide 29: Further information: Revenue reconciliation
Further information 57 Revenue Reconciliation % % Year to 31 December £m change €m change 2010 Revenue R 6 055 6,055 7 084 7,084 Base businesses 88 +2% 103 +2% Acquisitions 46 +1% 54 +1% Disposals (156) -3% (182) -3% Currency effects (31) -1% (157) -2% 2011 Revenue 6,002 -1% 6,902 -3% 58 29
Slide 30: Adjusted operating profit reconciliation; Reported net profit
Adjusted operating profit Reconciliation % % Year to 31 December £m change €m change 2010 Adjusted operating profit 1 555 1,555 1 819 1,819 Base business 73 +5% 85 +5% Acquisitions 8 +1% 10 +1% Disposals (25) -2% (29) -2% Currency effects 15 +1% (15) -1% 2011 Adjusted operating profit 1,626 +5% 1,87
Slide 31: Post tax return on invested capital; Dividend equalisation
Post tax return on invested capital 2011 2010 £m £m Adjusted operating profit 1,626 1,555 Less tax at effective rate (379) (353) 1,247 1,202 Capital employed 7,424 7,203 Cumulative amortisation 4,544 4,458 Year end invested capital at year end exchange rates 11,968 11,661 Average invested capital* a
Slide 32: Elsevier growth and currency analysis; Reed Exhibitions cycling impact
Elsevier growth and currency analysis Year on year Acquisitions / Constant change in Other Underlying disposals currency hedge rates currency Total 12 months to 31 December 2011 Revenue +2% -1% +1% +1% 0% +2% Adjusted operating profit +4% -1% +3% +3% 0% +6% Adjusted operating margin +0.7% 0% +0.7% +
Slide 33: Currency profile; Credit metrics
Currency profile Average rates for year: 2011 2010 2011 Adjusted profit before tax £ US dollar 1.60 1.55 Euro 11.15 15 11.17 17 € Sterling 18% US dollar 1.39 1.32 Sterling 0.87 0.85 US dollar 36% Year end rates: 2011 2010 Euro £ 35% US dollar 1.55 1.56 O Other 11% E Euro 11.20 20 11.17 17 € US dolla
Slide 34: Cost of borrowings; Term debt maturity profile
Cost of borrowings Debt predominantly denominated in US dollars at 31 December 2011 • 66% of gross debt (2010: 77%) • 78% of net debt (2010: 92%) Majority of debt fixed at 31 December 2011 • 69% of gross debt (2010: 73%) Blended interest rate on gross debt • 2011 average 5.8% (inc. amortising costs,
Slide 35: 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