Reed Elsevier NV — H1 2014 Earnings Presentation
26 slides from Reed Elsevier NV's earnings presentation, 2014
Slide 1: Reed Elsevier Interim Results 2014
Reed Elsevier Interim Results 2014 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 amen
Slide 2: H1 2014 financial highlights
Duncan Palmer, CFO 3 H1 2014 financial highlights • Underlying revenue growth +4% (+3% excluding biennial exhibition cycling) • Underlying adjusted operating profit growth +5% • Adjusted profit before tax growth at constant currencies +8% • Adjusted EPS growth at constant currencies +11% • Cash flow
Slide 3: Profit and loss; Reconciliation of net profit
Profit and loss change 2014 2013 constant change 6 months to 30 June £m £m change currency underlying Revenue 2,847 3,025 -6% +1% +4% / +3%* Adjusted operating profit 860 870 -1% +5% +5% Adjusted operating margin 30.2% 28.8% Adjusted net interest expense (69) (92) Adjusted profit before tax 791 778
Slide 4: Adjusted earnings and dividends per share; Revenue
Adjusted earnings and dividends per share Reed Elsevier Reed Elsevier PLC NV Adjusted earnings per share 27.8p +5% €0.52 +8% Interim dividend per share* 7.00p +5% €0.151 +14% Dividend cover LTM 2.2x 2.0x * Proposed equalised dividends per share; equalised at €1.26:£1 (2013: €1.16:£1); average exchan
Slide 5: Adjusted operating profit; Currency profile
Adjusted operating profit Underlying growth in all business areas change 2014 2013 constant change 6 months to 30 June £m £m change currency underlying Scientific, Technical & Medical 348 353 -1% +2% +3% Risk Solutions & Business Information 253 260 -3% +4% +6%* Legal 111 109 +2% +10% +5% Exhibition
Slide 6: Adjusted operating cash flow conversion; Free cash flow
Adjusted operating cash flow conversion 2014 2013 6 months to 30 June £m £m Adjusted operating profit 860 870 Capital expenditure (123) (152) Depreciation 114 127 Working capital and other items (89) (106) Adjusted operating cash flow 762 739 Cash flow conversion rate 89% 85% EBITDA 974 997 11 Free
Slide 7: Uses of free cash flow; Debt management
Uses of free cash flow 2014 6 months to 30 June £m Free cash flow after dividends 165 Disposals: total consideration 26 Acquisitions: total consideration (95) Share buybacks (400) Cash taxes on disposals 2 Other* 14 Currency translation 82 Movement in net debt (206) Net debt at 30 June (3,278) Net d
Slide 8: Term debt maturities; Balance sheet
Term debt maturities At 30 June 2014 $m 1,100 1,000 900 800 700 600 500 1,028 993 400 753 684 300 200 382 420 357 100 186 150 - 0 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 >2023 Term debt translated at 30 June 2014 exchange rates, stated at par value 15 Balance sheet 30 June 2014 31 Dec 20
Slide 9: Erik Engstrom, CEO
Erik Engstrom, CEO 17 This slide is intentionally left blank 18 9
Slide 10: Reed Elsevier H1 2014 progress; Financial performance
Reed Elsevier H1 2014 progress • Continued positive trends – Underlying revenue and profit growth across all major business areas – Further improvement in profitability – Strong financial position and cash generation • Further improvement in business profile and earnings quality – Continued business
Slide 11: Underlying revenue and adjusted operating profit growth by business area
Underlying revenue growth across business areas +8%* Exhibitions +3% Scientific, Technical & Medical Legal +1% Risk Solutions & Business Information +6% *including around 2 percentage points of positive biennial exhibition cycling and timing effects 21 Underlying adjusted operating profit growth acr
Slide 12: Scientific, Technical & Medical; Risk Solutions & Business Information
Scientific, Technical & Medical Underlying revenue growth • Overall underlying revenue growth accelerated slightly in H1 • Primary research article submission and usage growth strong; subscription revenue growth rate around half percentage point higher • Good growth in scientific databases & tools a
Slide 13: Legal; Exhibitions
Legal Underlying revenue growth • Overall revenue trends unchanged; growth in online solutions largely offset by print declines • US and European markets remain subdued; other international markets saw good growth • New product releases and rollouts continued; adoption and usage progressing well • H
Slide 14: Strategic direction: unchanged; Organic transformation
Reed Elsevier strategic direction: unchanged Where we are going • Deliver improved outcomes to professional customers • Combine content & data with analytics & technology in global platforms • Build leading positions in long term global growth markets • Leverage institutional skills, assets and reso
Slide 15: Portfolio reshaping; Use of cash
Portfolio reshaping: supporting organic growth strategy H1 2014 Selective acquisitions: Focus on data sets, analytics and high growth markets • Including Innovata, Tracesmart, Wunelli, Amirsys, AFG Group • 10 transactions; total consideration £95m Selective disposals: Further exits from marketing se
Slide 16: Summary
Summary H1 2014 • Continued positive trends • Further improvement in business profile and earnings quality FY 2014 Outlook • “Underlying trends in our business continue to be positive as we enter the second half, and we remain confident that we will deliver another year of underlying revenue, profit
Slide 17: Appendices Contents
Appendices 33 Contents Further information Financial information in Euros 36 Revenue 44 Profit and loss 37 Adjusted operating profit 45 Reconciliation of net profit 38 Dividend equalisation 46 Revenue 39 STM growth and currency analysis 47 Adjusted operating profit 40 Risk Solutions and Business Inf
Slide 18: Further information: Revenue
Further information 35 Revenue Year over year change % % 6 months to 30 June £m change €m change 2013 Revenue 3,025 3,570 Underlying growth 108 +4% 127 +4% Acquisitions 35 +1% 41 +1% Disposals (126) -4% (149) -4% Currency effects (195) -7% (116) -4% 2014 Revenue 2,847 -6% 3,473 -3% 36 18
Slide 19: Adjusted operating profit; Dividend equalisation
Adjusted operating profit Year over year change % % 6 months to 30 June £m change €m change 2013 Adjusted operating profit 870 1,027 Underlying growth 44 +5% 51 +5% Acquisitions 7 +1% 8 +1% Disposals (6) -1% (7) -1% Currency effects (55) -6% (30) -3% 2014 Adjusted operating profit 860 -1% 1,049 +2%
Slide 20: STM growth and currency analysis; Risk Solutions and Business Information
Scientific, Technical & Medical Growth and currency analysis Period Acquisitions / Constant change in Other Underlying disposals currency hedge rates currency Total Six months ended 30 June 2014 Revenue +3% -1% +2% 0% -6% -4% Adjusted operating profit +3% -1% +2% +1% -4% -1% Adjusted operating margi
Slide 21: Exhibitions: cycling impact; Summary of other financial matters
Exhibitions: cycling impact H1 Revenue growth % 2010 2011 2012 2013 2014 Total +9% +1% +25% +2% +9% Impact of acquisitions / divestments +1% +1% +10% 0% +1% Underlying +8% 0% +15% +2% +8% Impact of cycling shows +11% -10% +8% -5% +2%* Underlying excluding cycling -3% +10% +7% +7% +6%* * And timing 4
Slide 22: Financial information in Euros: Profit and loss
Financial information in Euros 43 Profit and loss change 2014 2013 constant change 6 months to 30 June €m €m change currency underlying Revenue 3,473 3,570 -3% +1% +4% / +3%* Adjusted operating profit 1,049 1,027 +2% +5% +5% Adjusted operating margin 30.2% 28.8% Adjusted net interest expense (84) (1
Slide 23: Reconciliation of net profit; Revenue (euros)
Reconciliation of net profit Adjusted to reported 2014 2013 6 months to 30 June €m €m change Adjusted net profit 736 698 +5% Adjustments (after tax): Amortisation of acquired intangible assets (184) (192) Net financing cost on pension schemes (7) (7) Acquisition related costs (11) (16) Disposals and
Slide 24: Adjusted operating profit; Adjusted operating cash flow conversion (euros)
Adjusted operating profit Underlying growth in all business areas change 2014 2013 constant change 6 months to 30 June €m €m change currency underlying Scientific, Technical & Medical 425 417 +2% +2% +3% Risk Solutions & Business Information 309 307 +1% +4% +6%* Legal 135 129 +5% +10% +5% Exhibition
Slide 25: Free cash flow; Uses of free cash flow (euros)
Free cash flow 2014 2013 6 months to 30 June €m €m Adjusted operating cash flow 930 872 Cash interest paid (59) (101) Cash tax paid (162) (201) Acquisition integration / other* (9) (14) Free cash flow before dividends 700 556 Dividends (498) (466) Free cash flow after dividends 202 90 *Net of cash t
Slide 26: Balance sheet (euros)
Balance sheet 30 June 2014 31 Dec 2013 €m €m Goodwill & acquired intangible assets 8,366 8,376 Internally developed intangible assets 895 864 Property, plant & equipment and investments 537 545 Net assets held for sale 32 21 Net pension obligations (584) (455) Working capital (1,306) (1,387) Net cap