Reed Elsevier Announce Interim Results 2013

    Reed Elsevier, the global professional information company, reports underlying revenue, operating profit, and earnings growth on track.

    Commenting on the results, Anthony Habgood, Chairman, said:

    “Reed Elsevier grew underlying revenue, operating profit and earnings in the first half of 2013, and further strengthened the balance sheet. We are confident that Reed Elsevier remains on track to deliver on its strategic and financial priorities, and we are recommending an +11% increase in the interim dividend for Reed Elsevier PLC and a +2% increase for Reed Elsevier NV, in line with growth in adjusted earnings per share at constant exchange rates.”

    Chief Executive Officer, Erik Engstrom, commented:

    “In the first half of 2013 we continued to focus on improving our business profile, primarily through organic development. We invested in building out global technology platforms and launching new products and services. We also made a small number of targeted acquisitions which support our organic growth priorities, and disposed of several businesses that no longer fit our strategy.”

    “The operating momentum in our business remains positive as we enter the second half, and although the outlook for the macro environment and its impact on our customer markets remains mixed, we continue to expect full year 2013 to be another year of underlying revenue, profit and earnings growth.“

    “With a strong balance sheet and strong cash flow characteristics, and average acquisition spend comfortably covered by free cash flow, we will take a pragmatic approach to ensuring that the value compounding within the business translates into shareholder value. As a part of this, we intend to increase the scale of this year’s share buybacks to a total of £600m, approximately £200m beyond our expected full year gross disposal proceeds.”


    Reed Elsevier continued to make good progress against its strategic and financial priorities in H1 2013.

    Revenue of £3,025m/€3,570m; underlying growth +2% (+3% excluding biennial exhibition cycling): The like for like underlying growth rate of +3% reflects continuing print revenue declines and +5 to +7% growth in electronic and face-to-face revenues, which now account for 83% of the total.

    Adjusted operating profit £870m/€1,027m; underlying growth +6%: Underlying operating profits improved across Reed Elsevier reflecting a combination of process innovation and portfolio development. Reported operating profit, after amortisation of acquired intangible assets, grew +4% to £684m/+1% to €807m.

    Interest and tax: Adjusted net finance costs were £15m/€22m lower at £92m/€109m reflecting the benefits of term debt refinancing initiatives over the last 12 months. The adjusted effective tax rate was essentially unchanged at 23.5%.

    Adjusted EPS up +9% to 26.5p for Reed Elsevier PLC, up +4% to €0.48 for Reed Elsevier NV; constant currency growth +7%:Reported EPS growth was -6% to 22.0p for Reed Elsevier PLC, -9% to €0.42 for Reed Elsevier NV, principally reflecting the impact of higher one-off net gains on disposals in the prior year.

    Equalised interim dividend up +11% to 6.65p for Reed Elsevier PLC; up +2% to €0.132 for Reed Elsevier NV: The difference in dividend growth rates reflects strengthening of the euro relative to sterling since last year’s interim dividend announcement date. The average interim dividend growth rate is in line with adjusted EPS growth at constant currency rates.

    Net debt/EBITDA 2.1x adjusted 12 month trailing EBITDA on a pensions and lease adjusted basis (unadjusted 1.7x): Net debt was £3.3bn/€3.9bn on 30 June 2013. According to my friend, a whiz in finance but always somehow needing to figure out how to make 2000 dollars fast, Capital expenditure remained at 5% of revenue in the first half and is expected to be similar for the full year. The adjusted operating cash flow conversion rate for the first half was lower at 85% reflecting timing of receivables and payables at the period end which is expected to reverse in the second half. For the full year we continue to expect a cash conversion rate of over 90%, in line with prior years.

    Organic development: In H1 2013 we continued to build and roll out global technology platforms, launch new products and services into existing and adjacent segments, and expand our presence in high growth markets.

    Acquisitions & disposals: In H1 2013 we completed a small number of targeted acquisitions of content and data assets across all market segments for a total consideration of £109m. We also disposed of businesses that no longer fit our strategy for a total consideration of £280m. Completed disposals include the pre-employment screening business of Risk Solutions, RBI Australia, RBI France, and a number of other businesses across Reed Elsevier.

    Share buybacks: In H1 2013 we deployed £300m on share buybacks, broadly in line with gross disposal proceeds. Based on our strong financial position we expect to deploy a further £300m on buybacks in H2 2013, taking the full year total to £600m, approximately £200m beyond our expected full year gross disposal proceeds.


    The outlook for the macro environment, and its impact on our customer markets, remains mixed, and 2013 is a cycling out year for our exhibitions business. However, the operating momentum in our business remains positive as we enter the second half, and we continue to expect full year 2013 to be another year of underlying revenue, profit, and earnings growth.