Reed Elsevier NV — FY2012 Earnings Presentation
34 slides from Reed Elsevier NV's earnings presentation, February 2013
Slide 1: Reed Elsevier Results 2012
Reed Elsevier Results 2012 Erik Engstrom, CEO Duncan Palmer, 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. The
Slide 2: 2012 Financial highlights
Duncan Palmer, CFO 3 2012 Financial highlights • Underlying revenue growth +4% (+3% excluding biennial exhibition cycling) • Underlying adjusted operating profit growth +6% • Adjusted EPS: +8% at constant currencies; PLC +7% to 50.1p; NV +14% to €0.95 • Reported EPS: PLC +42% to 46.0p; NV +53% to €0
Slide 3: 2012 Financial highlights continued; Profit and loss
2012 Financial highlights continued Strong financial position • Net debt / EBITDA: 2.2x* (2011: 2.3x) • Cash flow conversion: 94% (2011: 93%) • £250m buybacks completed in 2012 reflecting gross disposal proceeds of £242m • £100m buybacks completed in 2013 year to date * pensions and lease adjusted,
Slide 4: Reconciliation of net profit; Adjusted earnings and dividends per share
Reconciliation of net profit Reported to adjusted 2012 2011 Year to 31 December £m £m change Reported net profit 1,069 760 +41% Adjustments (after tax): Amortisation of acquired intangible assets 336 355 Acquisition related costs 16 33 Disposals and other non operating items (103) 16 Exceptional pri
Slide 5: Revenue; Adjusted operating profit
Revenue Underlying growth in all five business areas change 2012 2011 constant change Year to 31 December £m £m currency underlying Scientific, Technical & Medical 2,063 2,058 +1% +2% Risk Solutions 926 908 +1% +6% Business Information 663 695 -3% +2% Legal 1,610 1,634 -1% +1% Exhibitions 854 707 +2
Slide 6: Adjusted operating cash flow conversion; Capital expenditure by business
Adjusted operating cash flow conversion 2012 2011 Year to 31 December £m £m Adjusted operating profit 1,713 1,626 Capital expenditure (333) (350) Depreciation 227 207 Working capital and other items (4) 32 Adjusted operating cash flow 1,603 1,515 Cash flow conversion rate 94% 93% EBITDA 1,940 1,833
Slide 7: Free cash flow; Use of free cash flow
Free cash flow 2012 2011 Year to 31 December £m £m Adjusted operating cash flow 1,603 1,515 Cash interest paid (224) (235) Cash tax paid (281) (218) Restructuring/acquisition integration* (23) (85) Free cash flow before dividends 1,075 977 Dividends (521) (497) Free cash flow after dividends 554 480
Slide 8: Debt management; Debt maturities
Debt management Debt at 31 December 2012 • Net debt: $5.1bn (£3.1bn) • Cash and financial instruments: $1.2bn • Gross debt: $6.3bn 2012 refinancing activity • Issued $726m of 8 year euro-denominated notes with a coupon of 2.5% • Issued $561m of 10 year notes with a coupon of 3.125% • Retired $299m o
Slide 9: Debt management: 2013 and 2014; Balance sheet
Debt management: 2013 and 2014 2013 maturities • Refinancing substantially complete • Finish with further new debt issues 2014 maturities • Likely to be refinanced with mixture of CP and new bonds • Expect to see new issues at lower interest rates than existing maturities 17 Balance sheet 2012 2011
Slide 10: Return on invested capital; Summary of other financial matters
Return on invested capital 2012 2011 £m £m Invested capital at 2012 average exchange rates 10,933 11,023 Average invested capital 10,978 11,087 Adjusted operating profit after tax* 1,308 1,247 Return on average invested capital 11.9% 11.2% * Adjusted operating profit of £1,713m (2011: £1,626m) taxed
Slide 11: Reed Elsevier 2012 progress
Erik Engstrom, CEO 21 Reed Elsevier 2012 progress • Another year of improving performance – Positive revenue growth trajectory, improving earnings growth and ROIC – Underlying revenue and profit growth in all five business areas • Continuing transformation of asset base and earnings quality – Organi
Slide 12: Positive underlying revenue growth trajectory
Positive underlying revenue growth trajectory Including biennial exhibition cycling +4% +2% +2% 2009 2010 2011 2012 -6% 23 Positive underlying revenue growth trajectory Excluding biennial exhibition cycling +3% +3% +1% 2009 2010 2011 2012 -5% 24 12
Slide 13: Improved underlying adjusted operating profit growth; Improved earnings per share growth
Improved underlying adjusted operating profit growth +6% +5% 2009 2010 2011 2012 -1% -9% 25 Improved earnings per share growth Constant currency +8% +6% 2009 2010 2011 2012 -6% -9% 26 13
Slide 14: Increased return on invested capital; Gradual reduction in net debt / EBITDA
Increased return on invested capital 11.9% 11.2% 10.4% 10.6% 2009 2010 2011 2012 27 Gradual reduction in net debt / EBITDA 2.9x 2.5x 2.3x 2.2x 2009 2010 2011 2012 Pensions and lease adjusted; calculated in US dollars; 2012 unadjusted net debt / EBITDA 1.7x 28 14
Slide 15: Underlying revenue and adjusted operating profit growth across five business areas
Underlying revenue growth across all five business areas +15% (+7%*) Exhibitions +2% Scientific, Technical & Medical +1% Legal Risk Business Solutions Information +6% +2% *excluding cycling 29 Underlying adjusted operating profit growth across all five business areas +20% Exhibitions +4% Legal Scien
Slide 16: Scientific, Technical & Medical; Risk Solutions
Scientific, Technical & Medical Underlying revenue growth • Volume growth in science and medical research; double digit growth in article submissions and usage; strong growth in emerging markets +4% • Strong growth in electronic revenues +2% +2% +2% across all segments; declines in print book and ph
Slide 17: Business Information; Legal
Business Information Underlying revenue growth • Strong growth in most Major Data Services; double digit at BankersAccuity and ICIS • Modest growth in Leading Brands and Marketing Solutions +1% +2% • Moderating declines in Other Business Magazines & Services 2009 2010 2011 2012 • Portfolio transform
Slide 18: Exhibitions; Reed Elsevier strategic direction
Exhibitions Underlying revenue growth +15% • Strong underlying growth in the US and Japan; moderate growth in Europe, +10% softness in southern Europe; double digit +8% +7% growth in emerging markets • 30 new launches, mostly in high growth 0% markets 2009 2010 2011 2012 • Targeted acquisitions and
Slide 19: Organic transformation; Portfolio reshaping - Acquisitions
Organic transformation Example: underlying revenue growth by format Reed Elsevier 2012 underlying revenue growth excluding cycling: +3% -5-6% Print Face to face Electronic +7%* +5-6% *excluding cycling 37 Portfolio reshaping - Acquisitions • Added data services and content sets across all business a
Slide 20: Portfolio reshaping - Disposals; Implications for business profile
Portfolio reshaping - Disposals Exiting businesses where: • Not likely to migrate towards professional information solutions • No significant future value creation for Reed Elsevier • Decision not to invest to pursue global leadership position Approximately £600m* of revenue exited over 3 years Form
Slide 21: Implications for use of cash; Summary
Implications for use of cash • Strong balance sheet and cash flow generation • Average acquisition spend comfortably covered by cash flow • Continuing to use gross proceeds from disposals for share buybacks • £250m deployed on share buybacks in 2012 • Additional £100m completed 2013 year to date • F
Slide 22: Appendices Contents
Appendices 43 Contents Further information Financial information in Euros 46 Revenue (year over year change) 58 Profit and loss 47 Adjusted operating profit (year over year 59 Reconciliation of net profit change) 60 Revenue 48 Depreciation 61 Adjusted operating profit 49 Shares outstanding and buyba
Slide 23: Further information: Revenue
Further information 45 Revenue Year over year change % % Year to 31 December £m change €m change 2011 Revenue 6,002 6,902 Underlying growth 230 +4% 264 +4% Acquisitions 148 +3% 171 +3% Disposals (201) -4% (231) -4% Currency effects (63) -1% 417 +6% 2012 Revenue 6,116 +2% 7,523 +9% 46 23
Slide 24: Adjusted operating profit; Depreciation
Adjusted operating profit Year over year change % % Year to 31 December £m change €m change 2011 Adjusted operating profit 1,626 1,870 Underlying growth 85 +6% 97 +6% Acquisitions 35 +2% 40 +2% Disposals (22) -2% (25) -2% Currency effects (11) -1% 125 +7% 2012 Adjusted operating profit 1,713 +5% 2,1
Slide 25: Shares outstanding and buybacks; Dividend equalisation
Shares outstanding and buybacks Shares outstanding at 31 December 2012 2011 Reed Elsevier PLC (m) 1,186.6 1,202.6 Reed Elsevier NV (m) 724.8 735.8 Shares bought back in year 2013* 2012 Reed Elsevier PLC (m) 8.1 23.3 Average price paid (p) 676p 610p Reed Elsevier NV (m) 4.7 12.7 Average price paid (€
Slide 26: Scientific, Technical & Medical; Exhibitions: cycling impact
Scientific, Technical & Medical Growth and currency analysis Year on year Acquisitions / Constant change in Other Underlying disposals currency hedge rates currency Total Year to 31 December 2012 Revenue +2% -1% +1% +1% -2% - Adjusted operating profit +4% -3% +1% +3% -2% +2% Adjusted operating margi
Slide 27: Currency profile; Credit metrics
Currency profile Average rates for year: 2012 2011 2012 Revenue by geographic market £ US dollar 1.59 1.60 Euro 1.23 1.15 € Rest of World 19% US dollar 1.29 1.39 Sterling 0.81 0.87 North America 52% Year end rates: 2012 2011 Europe 22% £ US dollar 1.62 1.55 UK Euro 1.23 1.20 7% € US dollar 1.32 1.29
Slide 28: Cost of borrowings; Impact of IAS19 (revised)
Cost of borrowings Debt predominantly denominated in US dollars at 31 December 2012 • 66% of gross debt (2011: 66%) • 77% of net debt (2011: 78%) Majority of debt fixed at 31 December 2012 • 59% of gross debt (2011: 69%) Blended interest rate on average gross debt (inc. amortising costs, swaps, rede
Slide 29: Financial information in Euros: Profit and loss
Financial information in Euros 57 Profit and loss change 2012 2011 constant change Year to 31 December €m €m change currency underlying Revenue 7,523 6,902 +9% +3% +4%* Adjusted operating profit 2,107 1,870 +13% +6% +6% Adjusted operating margin 28.0% 27.1% +0.9%pts Net interest expense (266) (270)
Slide 30: Reconciliation of net profit; Revenue
Reconciliation of net profit Reported to adjusted 2012 2011 Year to 31 December €m €m change Reported net profit 1,315 874 +50% Adjustments (after tax): Amortisation of acquired intangible assets 413 408 Acquisition related costs 20 38 Disposals and other non operating items (127) 19 Exceptional pri
Slide 31: Adjusted operating profit; Adjusted operating cash flow conversion
Adjusted operating profit Underlying growth in all five business areas change 2012 2011 constant change Year to 31 December €m €m currency underlying Scientific, Technical & Medical 960 883 +1% +4% Risk Solutions 482 416 +7% +6% Business Information 146 127 +10% +10% Legal 288 263 +4% +4% Exhibition
Slide 32: Capital expenditure by business; Free cash flow
Capital expenditure by business 2012 % of 2012 2011 % of 2011 Year to 31 December €m revenues €m revenues Scientific, Technical & Medical 125 5% 107 5% Risk Solutions 26 2% 26 3% Business Information 21 3% 20 2% Legal 206 10% 228 12% Exhibitions 31 3% 22 3% Total capital expenditure 409 5.5% 403 5.8
Slide 33: Use of free cash flow; Balance sheet
Use of free cash flow 2012 2011 €m €m Free cash flow after dividends 683 551 Acquisitions* (398) (640) Disposals* 298 116 Share buybacks (308) - Other** (30) (30) Currency translation 28 (73) Movement in net debt 273 (76) Net debt at 31 December (3,846) (4,119) Net debt / EBITDA (pensions and lease
Slide 34: Return on invested capital; Impact of IAS19 (revised) (€)
Return on invested capital 2012 2011 €m €m Invested capital at 2012 average exchange rates 13,448 13,558 Average invested capital 13,503 12,750 Adjusted operating profit after tax* 1,610 1,434 Return on average invested capital 11.9% 11.2% * Adjusted operating profit of €2,107m (2011: €1,870m) taxed