Reed Elsevier NV — FY2013 Earnings Presentation
33 slides from Reed Elsevier NV's earnings presentation, February 2014
Slide 1: Reed Elsevier Results 2013
Reed Elsevier Results 2013 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: 2013 financial highlights
Duncan Palmer, CFO 3 2013 financial highlights • Underlying revenue growth +2% (+3% excluding biennial exhibition cycling) • Underlying adjusted operating profit growth +5% • Adjusted EPS: +7% at constant currencies; PLC +9% to 54.0p; NV +5% to €0.99 • Reported EPS: PLC +9% to 48.8p; NV +5% to €0.91
Slide 3: Profit and loss; Reconciliation of net profit
Profit and loss change 2013 2012 constant change Year to 31 December £m £m change currency underlying Revenue 6,035 6,116 -1% -3% +2% / +3%* Adjusted operating profit 1,749 1,688 +4% +1% +5% Adjusted operating margin 29.0% 27.6% Net interest expense (177) (216) Adjusted profit before tax 1,572 1,472
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 54.0p +9% €0.99 +5% Full year dividend per share* 24.6p +7% €0.506 +8% Dividend cover 2.2x 2.0x * Proposed equalised dividends per share; interim dividends equalised at €1.16:£1 (2012: €1.27:£1);
Slide 5: Adjusted operating profit
Adjusted operating profit Underlying growth in all business areas change 2013 2012 constant change Year to 31 December £m £m currency underlying Scientific, Technical & Medical 826 780 +2% +3% Risk Solutions 414 392 +4% +8% Business Information 107 119 -11% +14% Legal 238 234 +1% +5% Exhibitions 213
Slide 6: Adjusted operating cash flow conversion; Capital expenditure
Adjusted operating cash flow conversion 2013 2012 Year to 31 December £m £m Adjusted operating profit 1,749 1,688 Capital expenditure (308) (333) Depreciation 249 227 Working capital and other items 13 21 Adjusted operating cash flow 1,703 1,603 Cash flow conversion rate 97% 95% EBITDA 1,998 1,915 C
Slide 7: Free cash flow; Uses of free cash flow
Free cash flow 2013 2012 Year to 31 December £m £m Adjusted operating cash flow 1,703 1,603 Cash interest paid (195) (224) Cash tax paid (347) (281) Acquisition integration / other* (30) (23) Free cash flow before dividends 1,131 1,075 Dividends (549) (521) Free cash flow after dividends 582 554 *Ne
Slide 8: Debt management; Debt maturities
Debt management Debt as at 31 December 2013 • Gross debt: $5.4bn (£3.3bn) • Net debt: $5.1bn (£3.1bn) Debt management activity in 2013 • Reduced cash balance from $1.2bn to $0.3bn • Issued $282m of Swiss Franc 1.0% 2018 notes • Issued $389m of 3.125% 2022 notes in exchange for $309m of 8.625% 2019 n
Slide 9: Balance sheet; Currency profile
Balance sheet 2013 2012 £m £m Goodwill & acquired intangible assets 6,980 7,173 Internally developed intangible assets 720 647 Property, plant & equipment and investments 454 443 Net assets held for sale 18 201 Net pension obligations (379) (466) Working capital (1,156) (1,139) Net capital employed
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Slide 11: Reed Elsevier 2013 progress
Erik Engstrom, CEO 21 Reed Elsevier 2013 progress • Continued positive operating and financial momentum – Underlying revenue growth trends sustained – Improved profitability through process innovation – Strong cash generation • Further transformation of business profile and improvement in earnings q
Slide 12: Underlying revenue and operating profit growth
Underlying revenue growth Excluding biennial exhibition cycling +3% +3% +3% +1% 2010 2011 2012 2013 23 Underlying adjusted operating profit growth +6% +5% +5% -1% 2010 2011 2012 2013 24 12
Slide 13: Earnings per share growth; Return on invested capital
Earnings per share growth Constant currency +8% +7% +6% 2010 2011 2012 2013 -6% 25 Increased return on invested capital 11.7%* 12.1% 11.2% 10.6% 2010 2011 2012 2013 * 2012 ROIC restated post IAS19 Employee Benefits (revised) 26 13
Slide 14: Underlying growth across business areas
Underlying revenue growth across business areas +7%* Exhibitions +2% Scientific, Technical & Medical +1% Legal Risk Business Solutions Information +8% +4% *excluding biennial exhibition cycling 27 Underlying adjusted operating profit growth across business areas +4% Exhibitions +5% Legal Scientific,
Slide 15: Scientific, Technical & Medical; Risk Solutions
Scientific, Technical & Medical Underlying revenue growth • Strong growth in research article submissions and usage; further improvement in journal quality metrics • Solid journal subscription renewals and new sales; continued growth in “author pays” or “author’s funder pays” volumes from small base
Slide 16: Business Information; Risk Solutions and Business Information combined
Business Information Underlying revenue growth • Further acceleration in underlying revenue growth • Strong growth in Major Data Services driven by Accuity, ICIS and XpertHR • Modest growth in Leading Brands and Other Business Magazines & Services +4% • Continued portfolio transformation and alignme
Slide 17: Legal; Exhibitions
Legal Underlying revenue growth • Underlying revenue growth maintained • Subdued US and European markets • Growth in electronic product usage and revenues; continued print declines • Roll out of new platforms and products progressing well +1% +1% +1% • Margin expansion reflects process innovation an
Slide 18: Reed Elsevier strategic direction; Organic development
Reed Elsevier strategic direction 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 resources acros
Slide 19: Organic development; Portfolio reshaping
Organic development Revenue by geography 51% +3%* • Transformation to decision tools driving 55% 55% 54% 52% growth in developed markets • Leveraging institutional skills, assets and resources to extend reach in adjacent markets 29% 28% +1-2%* 31% 30% 29% • Continuing to build leading positions in l
Slide 20: Leverage; Implications for use of cash
Leverage maintained in recent range Net debt / EBITDA* 2.5x 2.3x 2.2x 2.1x 2010 2011 2012 2013 * Pensions and lease adjusted; 2013 unadjusted net debt / EBITDA 1.6x 39 Implications for use of cash • Strong balance sheet and cash flow characteristics • Average acquisition spend comfortably covered by
Slide 21: Summary
Summary 2013 • Continued positive operating and financial momentum • Further transformation of business profile and improvement in earnings quality 2014 Outlook • “Early trends across our business in 2014 remain broadly consistent with full year 2013, with some small variations by market and geograp
Slide 22: Appendices Contents
Appendices 43 Contents Further information Financial information in Euros 46 Revenue 56 Profit and loss 47 Adjusted operating profit 57 Reconciliation of net profit 48 Depreciation 58 Revenue 49 Dividend equalisation 59 Adjusted operating profit 50 STM growth and currency analysis 60 Adjusted operat
Slide 23: Further information: Revenue
Further information 45 Revenue Year over year change % % Year to 31 December £m change €m change 2012 Revenue 6,116 7,523 Underlying growth 136 +2% 167 +2% Acquisitions 69 +1% 86 +1% Disposals (362) -6% (446) -6% Currency effects 76 +2% (209) -2% 2013 Revenue 6,035 -1% 7,121 -5% 46 23
Slide 24: Adjusted operating profit; Depreciation
Adjusted operating profit Year over year change % % Year to 31 December £m change €m change 2012 Adjusted operating profit 1,688 2,076 Underlying growth 75 +5% 92 +5% Acquisitions 11 0% 13 0% Disposals (62) -4% (75) -4% Currency effects 37 +3% (42) -2% 2013 Adjusted operating profit 1,749 +4% 2,064
Slide 25: Dividend equalisation; Scientific, Technical & Medical
Dividend equalisation Interim Final 2013 2012 % change 2013 2012 % change Reed Elsevier PLC (p) 6.65 6.00 +11% 17.95 17.00 +6% UK tax credit rate 10% 10% 10% 10% Reed Elsevier PLC (p) (gross) 7.39 6.67 19.94 18.89 Equalisation ratio 1.538 1.538 1.538 1.538 Exchange rate (€:£) 1.16 1.27 1.22 1.16 Ree
Slide 26: Exhibitions: cycling impact; Return on invested capital
Exhibitions: cycling impact Revenue growth % 2010 2011 2012 2013 Total +9% +1% +25% +2% Impact of acquisitions / divestments +1% +1% +10% 0% Underlying +8% 0% +15% +2% Impact of cycling shows +11% -10% +8% -5% Underlying excluding cycling -3% +10% +7% +7% 51 Return on invested capital 2013 2012 £m £
Slide 27: Summary of other financial matters
Summary of other financial matters At 31 December Average Average 2013 2013 2012 £:$ 1.66 1.56 1.59 FX rates £:€ 1.20 1.18 1.23 Reed Elsevier PLC: 1,157m 1,172m 1,201m Shares outstanding Reed Elsevier NV: 710m 718m 734m 53 This slide is intentionally left blank 54 27
Slide 28: Financial information in Euros: Profit and loss
Financial information in Euros 55 Profit and loss change 2013 2012 constant change Year to 31 December €m €m change currency underlying Revenue 7,121 7,523 -5% -3% +2% / +3%* Adjusted operating profit 2,064 2,076 -1% +1% +5% Adjusted operating margin 29.0% 27.6% Net interest expense (209) (265) Adju
Slide 29: Reconciliation of net profit; Revenue
Reconciliation of net profit Reported to adjusted 2013 2012 Year to 31 December €m €m change Reported net profit 1,310 1,284 +2% Adjustments (after tax): Amortisation of acquired intangible assets 384 413 Net financing cost on pension schemes 15 10 Acquisition related costs 37 20 Disposals and other
Slide 30: Adjusted operating profit; Cash flow conversion
Adjusted operating profit Underlying growth in all business areas change 2013 2012 constant change Year to 31 December €m €m currency underlying Scientific, Technical & Medical 975 960 +2% +3% Risk Solutions 489 482 +4% +8% Business Information 126 146 -11% +14% Legal 281 288 +1% +5% Exhibitions 251
Slide 31: Capital expenditure; Free cash flow
Capital expenditure by business area 2013 2012 % of % of Year to 31 December €m revenues €m revenues Scientific, Technical & Medical 103 4% 125 5% Risk Solutions 29 3% 26 2% Business Information 21 3% 21 3% Legal 192 10% 206 10% Exhibitions 18 2% 31 3% Total capital expenditure 363 5.1% 409 5.5% Dep
Slide 32: Uses of free cash flow; Balance sheet
Uses of free cash flow 2013 2012 €m €m Free cash flow after dividends 688 683 Disposals: total consideration 390 298 Acquisitions (272) (398) Share buybacks (708) (308) Cash taxes on disposals (30) 32 Other* (35) (62) Currency translation 127 28 Movement in net debt 160 273 Net debt at 31 December (
Slide 33: Return on invested capital
Return on invested capital 2013 2012 €m €m Invested capital at 2013 average exchange rates 12,930 13,152 Average invested capital 13,041 13,503 Adjusted operating profit after tax* 1,579 1,586 Return on average invested capital 12.1% 11.7% Comparative information has been restated following the adop