Reed Elsevier NV — FY2010 Earnings Presentation
37 slides from Reed Elsevier NV's earnings presentation, February 2011
Slide 1: Reed Elsevier Results 2010
Reed Elsevier Results 2010 Mark Armour, CFO Erik Engstrom, CEO 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. These statements are subject to
Slide 2: 2010 financial highlights
Mark Armour, CFO 3 2010 financial highlights • Improved trading performance in stabilising / improving markets – Underlying revenue: +2% (2009: -6%) – Underlying adjusted operating profit: -1% (2009: -9%) • Adjusted operating margin -0.2%pts -0 2%pts at 25.7% 25 7% – Step-up in product development,
Slide 3: Adjusted profit and loss
Adjusted profit and loss 2010 2009 % % change Year to 31 December £m £m change constant Revenue 6,055 6,071 0% -1% Adjusted operating profit 1,555 1,570 -1% -2% Net interest expense (276) (291) Adjusted profit before tax 1,279 1,279 0% -1% Tax (290) (293) Minority interests (6) (4) Adjusted net prof
Slide 4: Revenue and adjusted operating profit
Revenue: £6,055m £m % change % change Year to 31 December 2010 constant underlying Elsevier +2% +2% 718 LexisNexis +1% +1% 693 2,026 Reed Exhibitions +9% +8% Reed Business Information -20% -2% 2 618 2,618 Reed Elsevier -1% +2% 7 Adjusted operating profit: £1,555m £m % change % change Year to 31 Dece
Slide 5: Change in underlying revenue, cost, profit; operating cash flow
Change in underlying revenue, cost, profit Adjusted Adjusted operating operating Year to 31 December 2010 Revenue cost profit El i Elsevier +2% 2% +1% 1% +4% 4% LexisNexis +1% +6% -12% Reed Exhibitions +8% +10% +4% Reed Business Information -2% -3% +4% Reed Elsevier – underlying +2% 2% +3% 3% -1% 1%
Slide 6: Capital expenditure; Adjusted profit and loss
Capital expenditure % of 2010 2010 2009 Year to 31 December revenues £m £m Elsevier 4% 79 72 LexisNexis 8% 209 140 Reed Exhibitions 1% 10 11 Reed Business Information 2% 13 19 Total 5% 311 242 • Increased investment in next generation of legal products and operations infrastructure • Capital expendi
Slide 7: Adjusted earnings per share; Reported profit before tax
Adjusted earnings per share Year to 31 December 2010 2009 % 2010 2009 % Adjusted net profit: Reed Elsevier £983m £982m 0% , €1,150m €1,099m , +5% PLC (52.9%) £520m £519m 0% NV (50.0%) €575m €550m +5% Average number of shares: PLC (m) 1,199.1 1,131.4 +6% NV (m) 734.5 693.9 +6% Adjusted earnings per s
Slide 8: Free cash flow; Movement in net debt
Free cash flow 2010 2009 % Year to 31 December £m £m change Adjusted operating cash flow 1,519 1,558 -3% Interest paid (287) (293) Tax paid (101) (214) Free cash flow before exceptional spend 1,131 1,051 +8% Restructuring / acquisition integration* (108) (133) Free cash flow before dividends 1,023 9
Slide 9: Balance sheet; Post tax return on invested capital
Balance sheet 2010 2009 £m £m Goodwill & intangible assets 7,898 7,971 Tangible fixed assets 291 292 Investments & net assets held for sale 184 176 Net pensions obligations (170) (235) Working capital (1,000) (857) Capital employed 7,203 7,347 Shareholders’ equity 1,943 1,732 Net debt 3,455 3,931 Cu
Slide 10: Dividends
Dividends Reed Elsevier Reed Elsevier PLC NV Equalised dividends: Interim dividend 5.4p 0% €0.109 +2% Final dividend (proposed) 15.0p 0% €0.303 +3% Total 20.4p 0% 0.412 +3% Dividend cover 2.1x 1.9x • Difference in dividend growth rates reflects changes in the euro:sterling exchange rate since prior
Slide 11: Reed Elsevier: 2010
Reed Elsevier: 2010 • Improved trading performance – Underlying revenues +2% against 6% decline in 2009 – Increased pproduct development p and sales & marketingg largely g y offset byy cost efficiencies • Considerable progress in development of business – Elsevier: renewals as expected; developed ne
Slide 12: Elsevier: Science & Technology; Health Sciences
Elsevier: Science & Technology 2010 revenues £1,015m Research • Continued growth in quality, quantity Growth +3% (Journals) and usage • Academic budgets constrained Databases • 2010 subscription revenues as expected and tools Reference / education Reference / • Solid growth in electronic reference e
Slide 13: Elsevier: 2010 progress and outlook
Elsevier 2010 Progress • SciVerse launched – integrated hub to improve researcher productivity and outcomes • SciVal expanded: Funding launched - segment specific institutional performance and planning tools • Simulation Learning Systems launched; Nurse2 acquired - innovative tools in growing health
Slide 14: LexisNexis; Separation of Risk Solutions and Legal & Professional
LexisNexis 2010 revenue £2,618m 2010 2009 % change % change £m £m constant underlying International Revenue 2 618 2,557 2,618 2 557 +1% +1% Legal Risk Solutions Risk Solutions +6% +6% US Legal -2% -1% US Legal International Legal -2% -2% Adjusted operating profit 592 665 -12% -12% 81% electronic l t
Slide 15: LexisNexis: Legal & Professional
LexisNexis: Legal & Professional Margin decline from low 20s% to 14% since 2008 • Revenue decline of c3.5% pa (-5% and -2%) – Structural decline of high g margin g revenues and cyclical y downturn in legal g market • Cost growth of c2% pa – Restructuring, cost management and efficiency gains (outsou
Slide 16: LexisNexis: Legal & Professional progress and outlook
LexisNexis: Legal & Professional 2010 Progress Next generation tools & infrastructure on track • Initial market introductions of – Lexis Advance for Solos - specific legal solution for small law – Lexis for Microsoft Office, LexisNexis Verdict and Settlement Analyzer - tools to perform specific func
Slide 17: LexisNexis: Risk Solutions
LexisNexis: Risk Solutions 2010 revenues £927m Insurance • Strong growth continued (+8%) driven by Growth +6% – High transactional activity – Increased demand for data and analytics Other business / Government • Market strength continuing; offset by financial budget uncertainty Insurance Screening •
Slide 18: LexisNexis: Risk Solutions outlook; Reed Exhibitions
LexisNexis: Risk Solutions Outlook • Good market fundamentals: strong growth in insurance; other markets continuing to improve / stabilise • Growing demand for risk assessment and data driven analytics • Introduce new data services to create value and capture higher volumes across insurance workflow
Slide 19: Reed Exhibitions: progress and outlook
Reed Exhibitions 2010 Progress Exhibition markets returned to growth • Gradual recovery in larger, more mature markets • Strong growth in emerging markets Customer value proposition robust • High visitor attendance; exhibitor numbers up 4% in top 50 annual shows • Successful events in many markets:
Slide 20: Reed Business Information
Reed Business Information 2010 Revenue £718m 2010 2009 % change % change Major data £m £m constant underlying services Business magazines / Major services marketing Revenue 718 891 -20% -2% solutions Leading brands Adjusted operating 89 89 0% +4% profit 46% electronic • Underlying revenue decline mo
Slide 21: Reed Business Information asset groups; Reed Elsevier today
Reed Business Information Asset group Value creation Growth* 2010 Progress Major data businesses Invest and grow +4% ICIS majority stake in CBI (ICIS, Bankers Almanac, China petrochemical / energy XpertHR, RCD) information Major online marketing Cyclical recovery; +10% Totaljobs: recovery in UK serv
Slide 22: Reed Elsevier today
Reed Elsevier today Revenue by format 27% 25% 37% % 33% 58% 56% 52% 51% 64% 64% 60% 14% 14% 15% 17% 13% 12% 12% 12% 12% 61% 14% 14% 59% 48% 50% 32% 35% 37% 28% 30% 22% % 22% % 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Electronic Face to face Print 43 Reed Elsevier today Creating value f
Slide 23: Reed Elsevier: In conclusion
Reed Elsevier: In conclusion 2010 • R t Returned d tto organic i revenue growth th • Considerable progress on individual business unit priorities 2011 • Most markets stable or improving • Building on actions taken in 2010 to create value for customers and in business • Gradual recovery and continued
Slide 24: Appendices index
Appendices index Financial information in Euros Further information 49 Adjusted profit and loss 63 Revenue (reconciliation) 50 Revenue and adjusted operating profit 64 Adjusted operating profit (reconciliation) 51 Adjusted operating cash flow 65 Reported net profit 52 Capital expenditure 66 Post tax
Slide 25: Adjusted profit and loss (euros)
Adjusted profit and loss 2010 2009 % % change Year to 31 December €m €m change constant Revenue 7,084 6,800 +4% -1% Adjusted operating profit 1,819 1,758 +3% -2% Net interest expense (323) (326) Adjusted profit before tax 1,496 1,432 +4% -1% Tax (339) (329) Minority interests (7) (4) Adjusted net pr
Slide 26: Adjusted operating cash flow; Capital expenditure
Adjusted operating cash flow 2010 2009 Year to 31 December €m €m Adjusted j operating p g pprofit ,8 9 1,819 1,758 , 58 Capital expenditure (364) (271) Depreciation 277 250 (87) (21) Working capital and other items 45 8 Adjusted operating cash flow 1,777 1,745 Cash flow conversion rate 98% 99% 51 Ca
Slide 27: Reported profit before tax; Free cash flow
Reported profit before tax 2010 2009 % Year to 31 December €m €m change Adjusted profit before tax 1,496 1,432 +4% Adjustments Amortisation of acquired intangible assets (408) (412) Impairment of acquired intangible assets and goodwill - (198) Exceptional restructuring costs (67) (204) Acquisition i
Slide 28: Movement in net debt; Balance sheet
Movement in net debt €m Net debt at 31 December 2009 (4,402) Free cash flow post dividends 631 Acquisitions / disposals: Disposals* 47 Acquisitions* (45) 2 Net proceeds from share options exercised / other 15 Currency translation (289) Net debt at 31 December 2010 (4,043) *Including cash tax relief
Slide 29: Elsevier; LexisNexis
Elsevier 2010 revenue €2,370m 2010 2009 % change % change €m €m constant underlying Science & Health Technology Sciences Revenue 2,370 2,223 +2% +2% 1,187 1,183 Adjusted operating profit 847 776 +4% +4% 57 LexisNexis 2010 revenue €3,063m 2010 2009 % change % change International €m €m constant under
Slide 30: LexisNexis separation; Reed Exhibitions
Separation of LexisNexis Risk Solutions and Legal & Professional (2010 pro forma) LexisNexis Revenue Profit LexisNexis Legal & Professional Risk Solutions • Legal research & litigation • Insurance • Marketing & business solutions Risk Legal & • Government Legal & Solutions Professional Risk • News &
Slide 31: Reed Business Information
Reed Business Information Revenue €840m 2010 2009 % change % change Major data €m €m constant underlying services Business magazines / Major services marketing Revenue 840 998 -20% -2% solutions Leadingg brands Adjusted operating profit 104 99 0% +4% 61 Further information 62 31
Slide 32: Revenue and adjusted operating profit reconciliation
Revenue Reconciliation Year to 31 December £m % change €m % change 2009 Revenue 6,071 6,800 Base businesses 100 +2% 112 +2% Acquisitions 5 -% 6 -% Disposals (173) -3% (194) -3% Currency effects 52 +1% 360 +5% 2010 Revenue 6,055 0% 7,084 +4% 63 Adjusted operating profit Reconciliation Year to 31 Dece
Slide 33: Reported net profit; Post tax return on invested capital
Reported net profit 2010 2009 2010 2009 Year to 31 December £m £m €m €m Adjusted net profit 983 982 1,150 1,099 Adj Adjustments ((post tax)) Amortisation of intangible assets (337) (411) (394) (460) Impairment of acquired intangible assets / goodwill - (136) - (152) Restructuring programme (37) (133
Slide 34: Dividend equalisation; Elsevier growth and currency analysis
Dividend equalisation Interim Final 2010 2009 % change 2010 2009 % change Reed Elsevier PLC (p) 5.4 5.4 0% 15.0 15.0 0% UK tax credit rate 10% 10% 10% 10% Reed Elsevier PLC (p) (gross) 6.0 6.0 16.67 16.67 Equalisation ratio 1.538 1.538 1.538 1.538 Exchange rate (€:£) 1.18 1.16 1.182 1.14 Reed Elsevi
Slide 35: Reed Exhibitions cycling impact; Currency profile
Reed Exhibitions: cycling impact Revenue growth % 2007 2008 2009 2010 Total +13% +9% -21% +9% Impact of acquisitions / divestments +1% -2%* +1% +1% Underlying +12% +11% -22% +8% Impact of cycling shows 0% +7% -7% 7% +11% Underlying excluding cycling +12% +4% -15% -3% *Biennial defence shows sold in
Slide 36: Credit metrics; Cost of borrowings
Credit metrics 31 Dec 2010 31 Dec 2009 Net debt / adjusted ebitda 2.5x 2.9x Funds from operations / net debt 37.3% 28.9% Retained cash flow / net debt 18.4% 17.7% Net interest cover 5.3x 5.0x Long term credit rating (S&P, (S&P Moody’s Moody s, Fitch) BBB+/Baa1/A BBB+/Baa1/A- BBB+/Baa1/A BBB+/Baa1/A-
Slide 37: Term debt maturity profile; Information for US institutions
Term debt maturity profile $m 1,200 1,000 800 600 $1,172 $950 $945 400 $$594 $624 $503 $551 200 $286 $200 $0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 >2020 Term debt stated at par value 73 Information for US institutions • Reed Elsevier PLC ADR (ticker: RUK) and Reed Elsevier NV ADR (ticker: E