Reed Elsevier NV — H1 2009 Earnings Presentation
36 slides from Reed Elsevier NV's earnings presentation, 2009
Slide 1: Reed Elsevier Interim Results 2009
Reed Elsevier Interim Results 2009 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 number of risks and uncertaintie
Slide 2: Highlights
Highlights Relatively robust performance in tougher trading conditions; advertising and promotion markets particularly hit Tight control of cost base; restructuring programme on track More aggressive market and product strategies to drive organic revenue development E it placing Equity l i tot stren
Slide 3: 2009 first half performance; Adjusted profit and loss
2009 first half performance Revenue +3%; Adjusted operating profit +5%; Adjusted margin +0.4% pts • Professional information businesses relatively robust • Advertising d e t s g aandd ppromotion o ot o markets a ets ssignificantly g ca t y impacted pacted by gglobal oba recession ecess o • First hal
Slide 4: Revenue and Adjusted operating profit
Revenue 6 months to % change constant £m 30 June 09 total underlying Elsevier +3% 3% +3% 3% LexisNexis +26% -3% 944 1,297 Reed Exhibitions -22% -24% 463 Reed Business -17% % -18% 8% 356 I f Information ti Reed Elsevier +3% -7% 7 Adjusted operating profit 6 months to % change constant £m 30 June 09 t
Slide 5: Elsevier
Elsevier 2009 2008 % change 6 months to 30 June £m £m constant Revenue 944 771 +3% Adjusted operating profit 305 236 +14% Adjusted operating margin 32% 31% • Growing online sales, strong subscription renewals; further weakness in pharma • Underlying: revenues up 3%; adjusted operating profits up 13%
Slide 6: Elsevier Health Sciences; LexisNexis
Elsevier: Health Sciences 6 months to 30 June Revenue* Science & Technology +5% • Revenues up 6% excluding pharma Health Sciences +2% promotion Overall +3% • Good growth in medical research; strong growth in clinical decision H1 2009 revenues £449m support • Strong performance in nursing and Interna
Slide 7: LexisNexis US Legal and International
LexisNexis: US Legal 6 months to 30 June Revenue* US Legal -5% • Law firm revenues +1%, excluding International +1% legal directory listings Risk Solutions -2% • Directory Di lilistings i -29% 29% Overall -3% – Adverse publication phasing – Law firms cut back on listings H1 2009 revenues £575m • Gov
Slide 8: LexisNexis Risk Solutions; Reed Exhibitions
LexisNexis: Risk Solutions 6 months to 30 June Revenue* US Legal -5% • Pro forma revenues 1% lower International +1% • Insurance +9%: policy churn driving volumes; increased adoption of Risk Solutions -2% analytics Overall -3% • Screening –27%: hiring downturn H1 2009 revenues £456m • Collections –4
Slide 9: Reed Exhibitions; Reed Business Information
Reed Exhibitions 6 months to 30 June Revenue* • Revenues 15% lower, before effect of Reed Exhibitions -24% shows cycling out, against very buoyant comparative period • Real estate, retail sectors particularly impacted by recession H1 2009 revenues £356m • Exhibition space sales and ancillary Ancilla
Slide 10: Reed Business Information; Restructuring programme
Reed Business Information 6 months to 30 June Revenue* User • online +7% • offline -6% • total -2% • User revenues robust as subscription Advertising and circulation revenues more resilient; • online -17% • offline -36% online user revenues continue to grow • total -30% (eg XpertHR, ICIS and Bankers
Slide 11: Reported operating profit; Adjusted operating cash flow
Reported operating profit 2009 2008 % change 6 months to 30 June £m £m constant Adjusted operating profit 782 619 +5% Adjustments Amortisation of acquired intangible assets (195) (109) Impairment of acquired intangible assets / (140) - goodwill Restructuring costs (103) (46) Acquisition integration
Slide 12: Free cash flow; Adjusted earnings and dividends
Free cash flow 2009 2008 6 months to 30 June £m £m % change Adjusted operating cash flow 717 586 +22% Interest paid (135) (57) Tax paid (126) (123) Free cash flow before dividends 456 406 +12% Ordinary dividends (326) (298) Restructuring expense / acquisition integration* (74) (20) Free cash flow be
Slide 13: 2009 Outlook; Equity placing
2009 Outlook • Elsevier: Continued revenue progress; good online sales, strong publishing programme; pressure on academic budgets; continued weakness in pharma promotion • LexisNexis: Modest decline in 2009 underlying revenues in continuing soft markets; ChoicePoint insurance revenues strong and con
Slide 14: Delivering on Reed Elsevier's growth potential
Ian Smith, CEO Delivering on Reed Elsevier’s growth potential • Fundamentally well positioned with clear strategy – Authoritative content, driving online solutions, portfolio management, driving cost efficiency • Great opportunity, due to changing technology and customer needs, to engage more closel
Slide 15: Getting closer to our customers
Getting closer to our customers Shift to online Content content allows deeper engagement with customers Testing and remediation tools Electronic resources Market leading content Customers Simulation software eBooks 29 Making professionals Improving Customer Impact better: A broader value proposition
Slide 16: Making professionals better
Making professionals Improving Customer Impact better: A broader value proposition “MEDai’s severity methodology is patient specific and clinically focused. Because of this, our physicians trust the data which facilitates behavior change leading to improved outcomes.” - Medical Director, Clinical Im
Slide 17: Making professionals better
Making professionals Improving Customer Impact better: A broader value proposition “I am very impressed by XpertHR. I have found it particularly useful for formulating HR policy and keeping abreast of legal developments.” -- European HR Director, The Economist Less risky Making professionals Improvi
Slide 18: Customer insight: the virtuous circle
Customer insight: the virtuous circle Deep Customer Insight Agile Innovation Customer Value Capture Effective Go To Market 35 Technology is an opportunity Content Enriches and creates new 1. Responsiveness content 2. Time to market 3. Infrastructure 4. Analytics and Communities Technology Customers
Slide 19: Content that creates value for our customers
Content that creates value for our customers Actionable Integrated Smart High Quality 37 A great opportunity Content Organic growth driven by creation of customer value Technology Customers 38 19
Slide 20: Reed Business Information; Reed Exhibitions
Reed Business Information • RBI sale no longer on our agenda • Parts badly hit by decline of offline advertising, but we are managing cost and.... • ....rationalising the portfolio • Parts of the business fit our strategy well (information-intensive sectors where we can leverage content, customer va
Slide 21: LexisNexis Legal; LexisNexis Risk Solutions
LexisNexis Legal • Strong brands, authoritative content, good market positions globally • Favourable drivers of long term professional growth – Increasing legislation, regulatory complexity, litigation and compliance, and growing demand for increasing professional productivity and effectiveness • In
Slide 22: Elsevier Science & Technology; Health Sciences
Elsevier Science & Technology • World class scientific content; #1 share of citations worldwide • Increasing R&D output; academic budgets currently under pressure • Opportunity to engage more directly in productivity of research 43 Elsevier Health Sciences • Strong position in research, education an
Slide 23: More aggressive market and product strategies
More aggressive market and product strategies • Content that creates value for customers – Leverage content with information, data, tools, analytics • Get closer to customers – Deeper insight into and integration with customers • Build on technology base – Move from online content to engaging electr
Slide 24: Appendices index
Appendices index Financial information in Euros Further information 49 Revenue and adjusted operating profit 59 Revenue (reconciliation) 50 Adjusted profit and loss 60 Adjusted profit before tax (reconciliation) 51 Elsevier 61 Adjusted j earnings g pper share 52 LexisNexis 62 Dividend equalisation 5
Slide 25: Revenue and adjusted operating profit; Adjusted profit and loss
Revenue and adjusted operating profit Revenue €m Profit €m 1,057 1,453 342 370 518 44 399 133 49 Adjusted profit and loss 2009 2008 % change % change 6 months to 30 June €m €m euros constant Revenue 3,427 3,165 +8% +3% Adjusted operating profit 876 798 +10% +5% Adjusted operating margin 25.6% 25.2%
Slide 26: Elsevier; LexisNexis
Elsevier 2009 2008 2009 2008 % change 6 months to 30 June £m £m €m €m constant Revenue 944 771 1,057 995 +3% Adjusted operating profit 305 236 342 304 +14% Adjusted operating margin 32% 31% 32% 31% • Growing online sales, strong subscription renewals; further weakness in pharma • Underlying: revenue
Slide 27: Reed Exhibitions; Reed Business Information
Reed Exhibitions 2009 2008 2009 2008 % change 6 months to 30 June £m £m €m €m constant Revenue 356 377 399 486 -22% Adjusted operating profit 119 128 133 165 -26% Adjusted operating margin 33% 34% 33% 34% y Exhibitors cutting back on promotional spend y Underlying: revenues down 24%; adjusted operat
Slide 28: Adjusted operating cash flow
Adjusted operating cash flow 2009 2008 2009 2008 6 months to 30 June £m £m €m €m Adjusted operating profit 782 619 876 798 Capital expenditure (93) (64) (104) (83) Depreciation 105 68 117 88 12 4 13 5 Share based payments / pensions (56) (24) (62) (31) Workingg capital p and other items ((21)) ((13)
Slide 29: Free cash flow
Free cash flow % % 2009 2008 2009 2008 change change 6 months to 30 June £m £m €m €m £ € Adjusted operating cash flow 717 586 803 756 +22% +6% Interest paid (135) (57) (151) (74) Tax paid (126) (123) (142) (159) Free cash flow before dividends 456 406 510 523 +12% -2% Ordinary dividends (326) (298)
Slide 30: Revenue; Adjusted profit before tax reconciliation
Revenue Reconciliation % % 6 months to 30 June £m change €m change 2008 Re Revenue en e 2 454 2,454 3 165 3,165 Base businesses (178) -7% (225) -7% Acquisitions 267 11% 337 11% Disposals (11) -1% (14) -1% Currency effects 528 22% 164 5% 2009 Revenue 3,060 25% 3,427 8% 59 Adjusted profit before tax R
Slide 31: Adjusted earnings per share; Dividend equalisation
Adjusted earnings per share 6 months to 30 June 2009 2008 % 2009 2008 % Adjusted profit attributable for total operations: Combined business £503m £421m +19% €563m €543m +4% Reed Elsevier PLC (52.9%) £266m £223m +19% Reed Elsevier NV (50.0%) €282m €272m +4% Average number of shares: Reed Elsevier PL
Slide 32: Reported profit attributable; Elsevier growth and currency analysis
Reported profit attributable 2009 2008 2009 2008 6 months to 30 June £m £m €m €m Adjusted profit attributable 503 421 563 543 Adjustments (post tax) Amortisation of intangible assets (220) (126) (246) (163) Impairment of goodwill and intangible assets (101) - (113) - Restructuring programme (71) (32
Slide 33: ChoicePoint pro forma; Currency profile
ChoicePoint pro forma Revenues Adjusted operating profit 2009 2008 Change 2009 2008 Change 6 months to 30 June $m $m % $m $m % Insurance 305 280 +9% 160 140 +14% Screening & authentication 67 93 4 13 Business services / other 92 96 23 13 Non-Insurance 159 189 -16% 27 26 +4% Corporate / shared - - -
Slide 34: Balance sheet; Movements in net debt
Balance sheet 30 June 31 Dec 30 June 31 Dec 2009 2008 2009 2008 £m £m €m €m Goodwill & intangible assets 7,887 9,305 9,307 9,584 Tangible fixed assets 277 329 327 339 Investments & net assets held for sale 179 241 211 248 Net pensions obligations (428) (369) (505) (380) Working capital (677) (832) (
Slide 35: Debt maturities; Cost of borrowings
Debt maturities $m Term debt ChoicePoint Facility 1,800 H1 2009 Term Debt Issues Term Debt 1,600 1,400 1,200 $997 $950 1,000 800 $621 600 $847 400 $837 $669 $500 $588 $553 $476 200 $438 $144 $187 0 $38 2009 2010 2011 2012 2013 2014 2015 2016 2017 >2018 69 Cost of borrowings Debt predominantly denomi
Slide 36: Debt ratios; Information for US institutions
Debt ratios LTM June 2009 LTM Dec 2008 Funds from operations / net debt 21 0% 21.0% 24 0% 24.0% Retained cash flow / net debt 13.6% 17.4% Net interest cover 5.5x 6.9x Net debt / EBITDA 3.6x 3.3x BBB+ / Baa1 / A- BBB+ / Baa1 / A- Long term credit rating (negative outlook) (negative outlook) Ratios pe