Reed Elsevier 2009 Investor Presentation
Transcript of Reed Elsevier 2009 Investor Presentation
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Issuedon
behalf
of
Reed
Elsevier
PLC
and
Reed
Elsevier
NV
18February2010
REEDELSEVIER2009RESULTSANNOUNCEMENT
Robustfinancialperformanceinunprecedentedglobalrecession
Coreprofessionalinformationrevenueshelduprelativelywell
Advertisingandpromotionmarketssignificantlyimpacted
Costs
reduced
substantially
ExcellentfirstyearprofitgrowthfromChoicePointacquisition
Strongcashgenerationandimprovedfinancialposition
Businesstrendscontinuein2010;longertermprospectsencouraging
ReedElsevier2009
m2008
mChange
%
Changeatconstantcurrencies
%
Revenue 6,071 5,334 +14% 0%
Adjustedoperating
profit
1,570 1,379 +14% +1%
Adjustedoperatingmargin 25.9% 25.9% Reportedoperatingprofit 787 901 13% 22%
Adjustedpretaxprofit 1,279 1,205 +6% 6%
Adjustedoperatingcashflow 1,558 1,407 +11% 2%
Netborrowings 3,931 5,726
ParentCompanies ReedElsevierPLC ReedElsevierNV
2009 2008Change
% 2009 2008Change
%
Adjustedearningspershare 45.9p 44.6p +3% 0.79 0.87 8%
Reportedearningspershare 17.2p 22.1p 22% 0.32 0.44 27%
Ordinarydividendpershare 20.4p 20.3p 0% 0.400 0.404 1%
Adjustedfiguresaresupplementalperformancemeasuresusedbymanagement.Reconciliationsbetweenthereportedandadjustedfiguresaresetoutinnote5totheCombinedFinancialInformationonpage30.
Commentingontheresults,AnthonyHabgood,ChairmanofReedElsevier,said:
Wearepleasedthatour2009resultswererelativelyrobustgiventhedepthoftheglobalrecession. Inaddition,
duringthe
second
half
we
substantially
strengthened
our
balance
sheet
both
through
an
equity
placing
and
throughgoodcashgeneration. InNovember,ErikEngstromtookoverasCEOand,asexpected,hashittheground
running. Thelatecyclenatureofsomeofourmarketsmakesforatoughenvironmentin2010butthe
fundamentalsofourbusinessesarestrong,ourbalancesheetisingoodshapeandnewmanagementisinplace
withthebackground,experienceandambitiontodrivethebusinessforward.
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Reed Elsevier 2009 Results Announcement 2
ReedElseviers
Chief
Executive
Officer,
Erik
Engstrom,
commented:
Ourprofessionalinformationrevenueshelduprelativelywellinwhatwasadifficultyearformostofour
customers. Howeverbusinessesdependentonourcustomersmarketingbudgetswerehithard.
Inthenearterm,someofourcustomermarketsremainunderpressurebutlongertermourprospectsare
encouraging.Wehavehighqualityassetsinattractiveglobalgrowthmarketsandwearefocusingeachbusinesson
itsowntopprioritiesinordertocapturethesegrowthopportunities. AcrossReedElsevierwearecommittedto
deliveringworldclassinformationandtoolsthatenableourcustomerstomakecriticaldecisions,enhance
productivityandimproveoutcomesandthisiscombinedwitharelentlesspursuitofprocessinnovationandcost
efficiency.Iamconvincedthatthesegoalswilldeliverincreasedvalueforourshareholders.
Robustfinancialperformanceinunprecedentedglobalrecession
Coreprofessionalinformationrevenueshelduprelativelywell
Elsevier(44%ofadjustedoperatingprofits)Revenuegrowth+4%,adjustedoperatingprofit+9%,atconstantcurrency
Stronggrowthinelectronicclinicalreference,clinicaldecisionsupportandnursingandhealthprofessional
education;continuedweaknessinpharmapromotion
Solidsciencejournalsubscriptionrenewalsfrom2008supported2009revenuegrowth
LexisNexis(42%ofadjustedoperatingprofits)Revenuegrowth+14%,adjustedoperatingprofit+13%,atconstantcurrency,includingfullyearcontribution
ofChoicePointacquisition
CorelawfirmmarketsflatinUSandmarginallylowerinternationallyreflectingdownturninlegalservices
industry
USdirectorylistingswellbehindprioryear;corporate,governmentandacademicmarketslower
RiskSolutionsseesstronggrowthinInsuranceandGovernmentmarketsbutdeclineinothermarkets;profits
grow
strongly
Advertisingandpromotionmarketssignificantlyimpacted
ReedExhibitions(10%ofadjustedoperatingprofits)Revenues 21%,adjustedoperatingprofits 28%,atconstantcurrency
Lowerspacesalesandfewerpayingdelegatesascorporationscutbackonmarketingspend;netcyclingout
ofbiennialexhibitions
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Reed Elsevier 2009 Results Announcement 3
ReedBusinessInformation(6%ofadjustedoperatingprofits)Revenues 18%,adjustedoperatingprofits 35%,atconstantcurrency
Advertisingmarketsdepressed;subscriptionslessimpacted;growthindataservices
Costsreducedsubstantially
Significantactionsacrossthecostbaseincludingthepreviouslyannouncedrestructuringprogrammes
Underlyingcosts(i.e.excludingacquisitionsanddisposals)were5.4%or227mlower
Adjustedoperatingmarginflat;0.8%pointslowerunderlying,despite6%underlyingrevenuedecline
Excellentfirst
year
profit
growth
from
ChoicePoint
acquisition
Proformarevenues+1%,adjustedoperatingprofits+44%,atconstantcurrency
StrongrevenuegrowthinInsurancebusiness;declinesinemploymentscreeningandothermarkets
StronggrowthinprofitabilitydrivenbyInsurancebusinessandsignificantintegrationbenefits
Strongcashgenerationandimprovedfinancialposition
Conversionofadjustedoperatingprofitintocashat99%
Freecashflowof1,051mbeforerestructuringspendanddividends
829mnetproceedsofequityplacinginJuly2009usedtoreducedebt
Netdebtat31December20093.9bn($6.3bn;4.4bn)
Netdebt/adjustedebitda:2.9x(pensionsandleaseadjusted)(LTMJune2009:3.6x)
Parentcompanyearningspershareanddividends
Adjustedearningspershare+3%to45.9pforReedElsevierPLCand 8%to0.79forReedElsevierNV; 9%at
constantcurrencies
EquityplacinginJuly2009has4%dilutiveeffectonadjustedearningspershare;further4%fullyeareffect
expectedin2010(8%infirsthalf)
Reportedearningspershare 22%to17.2pforReedElsevierPLCand 27%to0.32forReedElsevierNV:
principallyreflectsRBIintangibleassetandgoodwillimpairmentandhigherchargesforintangibleasset
amortisation,exceptionalrestructuringandacquisitionintegration
ReedElsevierPLCfinaldividendflatat15.0p;equalisedReedElsevierNVfinaldividend+1%to0.293. Total
dividendsfor2009+0.5%to20.4pforReedElsevierPLCand 1%to0.400forReedElsevierNV. (Differencein
growthratesintheequaliseddividendsreflectschangesintheeuro:sterlingexchangeratesinceprioryear
dividendannouncementdates)
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Reed Elsevier 2009 Results Announcement 4
Outlook
Asexpected,businesstrendsseeninthesecondhalfarecontinuingin2010,particularlywithregardtolatecycle
effectsinourrelativelyresilientprofessionalmarkets. Advertisingandpromotionandcertainothermarkets,such
asemployeescreening,remaindifficult.Therateofrevenuedeclineis,however,expectedtoslowascomparatives
geteasier. Amodestreductioninadjustedoperatingmarginisexpectedduetoaweakrevenueenvironmentand
increasedinvestmentinlegalmarkets.
Elsevier: Goodgrowthisexpectedtocontinueinelectronicmedicalreference,clinicaldecisionsupport
andhealthprofessions,althoughpharmapromotionremainsweak.Completionofsubscriptionrenewals
for2010iswellprogressed. Academicbudgetpressuresarecontinuing.Loweroverallrevenuegrowthis
expected.
LexisNexis: TrendsinUSlegalandinternationalmarketsareexpectedtocontinue,reflectingpressureson
thelegalindustryandlatecycleeffectsonsubscriptionrevenues. Goodgrowthiscontinuinginthe
insurancesegmentinRiskSolutions.Adjustedoperatingmarginisexpectedtobelower,reflectingaweak
revenueenvironmentandincreasingproduct,marketingandinfrastructurespendinthelegalbusinesses,
partiallymitigatedbycontinuingcostactionsandthegrowingprofitabilityoftheChoicePointbusiness.
ReedExhibitions: Forwardbookingsremaincautiouswithexhibitorscommittinglater.Annualshow
revenuesareexpectedtobelower.2010willseebenefitofnetcyclinginofbiennialshows.
ReedBusiness
Information:
Current
trends
are
expected
to
continue
with
advertising
markets
remaining
difficult,latecycleeffectsmaintainingpressureonprintsubscriptionsandgoodgrowthindataservices.
Revenuesareexpectedtobelowerandreengineeringofportfolioandcostswillcontinue.
Latecycleeffectsarecontinuingin2010andwillbeparticularlysevereinthefirsthalfwhichwillalsosee
dilutionfromtheJuly2009shareplacings. WeareconfidentthatReedElsevierhashighqualityassetsin
attractiveglobalgrowthmarketsandthatthelongertermprospectsareencouraging.
FORWARDLOOKINGSTATEMENTS
ThisresultsannouncementcontainsforwardlookingstatementswithinthemeaningofSection27AoftheUSSecuritiesAct1933,as
amended,andSection21EoftheUSSecuritiesExchangeAct1934,asamended. Thesestatementsaresubjecttoanumberofrisksand
uncertaintiesandactualresultsandeventscoulddiffermateriallyfromthosecurrentlybeinganticipatedasreflectedinsuchforwardlooking
statements. Thetermsexpect,shouldbe,willbeandsimilarexpressionsidentifyforwardlookingstatements. Factorswhichmay
causefutureoutcomestodifferfromthoseforeseeninforwardlookingstatementsinclude,butarenotlimitedto:generaleconomicand
businessconditions;demandforourproductsandservices;competitivefactorsintheindustriesinwhichweoperate;exchangerate
fluctuations;legislative,fiscalandregulatorydevelopments;politicalrisks;terrorism,actsofwarandpandemics;changesinlawandlegal
interpretationsaffectingReedElseviersintellectualpropertyrightsandinternetcommunications;theimpactoftechnologicalchange;and
otherrisksreferencedfromtimetotimeinthefilingsofReedElsevierPLCandReedElsevierNVwiththeUSSecuritiesandExchange
Commission.
ENQUIRIES: SybellaStanley(Investors)
+44(0)20
7166
5630
PatrickKerr(Media)
+44(0)20
7166
5646
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Reed Elsevier 2009 Results Announcement 5
Operatingandfinancialreview
OPERATINGREVIEW
% %
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstant
currenciesUnderlying
growthrates
Revenue
Elsevier 1,985 1,700 +17% 2,223 2,142 +4% +4% +4%
LexisNexis 2,557 1,940 +32% 2,864 2,444 +17% +14% 4%
ReedExhibitions 638 707 10% 715 891 20% 21% 22%
ReedBusinessInformation 891 987 10% 998 1,244 20% 18% 18%
Total 6,071 5,334 +14% 6,800 6,721 +1% 0% 6%
AdjustedoperatingprofitElsevier 693 568 +22% 776 716 +8% +9% +9%
LexisNexis
665
513
+30% 745 646 +15%
+13%15%
ReedExhibitions 152 183 17% 170 230 26% 28% 31%
ReedBusinessInformation 89 126 29% 99 159 38% 35% 34%
Unallocateditems (29) (11) (32) (14)
Total 1,570 1,379 +14% 1,758 1,737 +1% +1% 9%
Adjustedfiguresaresupplementalmeasuresusedbymanagement. Reconciliationsbetweenthereportedandadjusted
figuresaresetoutinnote5tothecombinedfinancialinformationonpage30.Thereportedoperatingprofitfiguresareset
outinnote2onpage26.
Unlessotherwiseindicated,allpercentagemovementsinthefollowingcommentaryrefertoperformanceatconstantexchangerates.Underlyinggrowthratesarecalculatedatconstantcurrencies,excludingacquisitionsanddisposals.Constantcurrency
growth
rates
are
based
on
2008
full
year
average
and
hedge
exchange
rates.
Elsevier
% %
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstantcurrencies
Underlyinggrowthrates
Revenue
Science&Technology 985 848 +16% 1,103 1,068 +3% +5% +5%
HealthSciences 1,000 852 +17% 1,120 1,074 +4% +3% +3%
1,985
1,700
+17% 2,223 2,142 +4%
+4%
+4%
Adjustedoperatingprofit 693 568 +22% 776 716 +8% +9% +9%
Adjustedoperatingmargin 34.9% 33.4% 1.5pts 34.9% 33.4% 1.5pts
Elsevierhadarelativelyrobustyear.Inachallengingacademicbudgetenvironment,thejournalsbusiness
entered2009withgoodsubscriptionrenewalsfrom2008. InHealthSciences,growingonlinesalesinmedical
reference,clinicaldecisionsupportandnursingandhealthprofessionaleducationwerepartlyheldbackbyweak
pharmapromotionmarkets.Adjustedoperatingmarginsimprovedthroughsignificantrestructuringandcost
actions.
Revenuesandadjustedoperatingprofitsincreasedby4%and9%respectivelyatconstantcurrencies,bothbefore
andafterminoracquisitions. Costgrowthwaslimitedto1%throughsignificantcostsavings,including: the
streamliningof
business
processes
in
shared
services;
the
continued
ramp
up
of
journal
and
book
production
operationsinourChennaifacility;thefurtheroutsourcingofITdevelopmentandbackofficeactivities,including
applicationmanagementandfinancialtransactionprocessing;theconsolidationofactivities,includingtechnology
operationsandrealestate;andmoreeffectiveleveragingofglobalprocurement.
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Reed Elsevier 2009 Results Announcement 6
Operatingandfinancialreview
Thereported
operating
margin,
after
amortisation
of
acquired
intangible
assets
and
exceptional
restructuring
costs,was28.4%,up2.3percentagepoints.
Science&Technologysawrevenuegrowthof5%atconstantcurrencies.ThiswasdrivenbygoodScienceDirect
subscriptionrenewalsenteringtheyear.OnlineusageofScienceDirectcontinuedtogrowcloseto20%.TheScopus
abstractandindexingdatabasesawstronggrowthinsubscriptionsandwasexpandedthroughtheadditionofnew
contentinthehumanities.Goodgrowthinebooksandotheronlinetransactionalsaleswereoffsetbylowerprint
booksalesreflectingtightercustomerbudgetsandchanneldestocking.
InHealthSciences,revenueswereup3%atconstantcurrencies. Strongperformancesinmedicalresearch,nursing
andhealthprofessionaleducation,andinclinicaldecisionsupportwereinparttemperedbycontinuingweakness
inpharma
promotion
markets.
Pharma
promotion
and
other
advertising
revenues,
which
accounted
for
approximately20%ofHealthSciencesrevenues,weredown7%,reflectingfewerblockbusterdruglaunchesanda
reductioninthemarketingbudgetsofpharmaceuticalcompanies.Excludingpharmapromotionandother
advertising,revenueswere5%aheadatconstantcurrencies.Thegrowthinmedicalresearchreflectsgrowing
onlinesubscriptionstomedicalcontent. Innursingandhealthprofessionaleducation,stronggrowthwasachieved
throughtheincreasingdemandforhealthcareprofessionals,newpublishing,andthefurtherdevelopmentand
increasingpenetrationofonlineresources. Doubledigitgrowthwasseeninclinicaldecisionsupportwithgrowing
demandforonlineworkflowsolutionsthatcombinecontentwithpredictiveanalytics. Inclinicalreference,strong
growthinMDConsultandotheronlinereferenceproductswasoffsetbylowerprintbooksales.
Elsevierhascontinueditslongstandingcommitmenttoinnovationandnewproductdevelopment. Inscientific
andmedical
research,
the
focus
is
on
building
out
new
content
and
data
sets
and
increasing
the
functionality
of
crossdisciplineanddisciplinespecificresearchanddiscoverytools. Institutionalplanningandperformancetools
arealsobeingdevelopedtohelpimproveeconomicoutcomesforresearchersandacademicleaders. Additionally
inHealthSciencesthereisparticularfocusonincreasingtherangeandsophisticationofourclinicaldecision
supportsolutionstomakehealthcaremoreefficientandtoimprovemedicaloutcomes.
For2010,goodmomentumisexpectedinhealthsciencesfromthecontinuedgrowthinthehealthprofessionsand
theincreasingadoptionofonlineresources,althoughpharmapromotionandotheradvertisingrevenuesremain
weak.Academicbudgetpressuresareexpectedtocontinue. Overallrevenuegrowthisexpectedtobelowerfor
theyear.
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Reed Elsevier 2009 Results Announcement 7
Operatingandfinancialreview
LexisNexis % %
2009m
2008m
Change%
2009m
2008m
Change%
Change
atconstantcurrencies
Underlyinggrowthrates
Revenue
USLegal 1,126 1,017 +11% 1,261 1,281 2% 6% 6%
International 566 545 +4% 634 687 8% 3% 1%
RiskSolutions 865 378 +129% 969 476 +104% +95% 2%
2,557 1,940 +32% 2,864 2,444 +17% +14% 4%
Adjustedoperatingprofit 665 513 +30% 745 646 +15% +13% 15%
Adjustedoperatingmargin 26.0% 26.4% 0.4pts 26.0% 26.4% 0.4pts
LexisNexishadachallengingyear. ThecorelawfirmbusinesswasflatintheUSandmarginallylower
internationallyreflectingthedownturninthelegalindustrywhilstUSdirectorylistingswerewellbehindthe
prioryearasfirmscutbackondirectoryspend. Corporate,governmentandacademicmarketswerelower.
ChoicePointmadeanexcellentcontributioninitsfirstyear,growingitsprofitsstronglyandboostingoverall
revenuesandprofits. Adjustedoperatingmarginswereslightlylowerduetotheunderlyingrevenuedecline
largelymitigatedbyfurtherrestructuringandcostactionsandthestronggrowthinChoicePointprofitability.
Revenuesandadjustedoperatingprofitsincreasedby14%and13%respectivelyatconstantcurrenciesincludinga
firstfullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008. ExcludingChoicePointand
minoracquisitionsanddisposals,underlyingrevenuesandadjustedoperatingprofitsweredown4%and15%
respectively.
Theoverall
adjusted
operating
margin
was
0.4
percentage
points
lower
at
26.0%
reflecting
the
underlyingrevenuedeclineandincreasesinspendingonnewproductdevelopment,salesandmarketingand
operationalsupport,largelymitigatedbythefurtherrestructuringandcostactions,andtheincreasingprofitability
ofChoicePoint.
Costsavingsinclude: thefullyearbenefitoftheconsolidationin2008oftheCorporateandPublicMarkets
businesswithUSLegalaswellastheconsolidationofUSoperations;continuedoutsourcingofsystemsengineering
andmaintenance,softwaredevelopmentengineering,datafabrication,andotherproductionactivities;thefurther
consolidationandstreamliningoftechnologyoperationsandrealestate;moreeffectiveleveragingofglobal
procurement;streamliningofthescreeningbusinessinRisk;andconsolidationofactivitiesontheintegrationof
ChoicePoint.
Thereportedoperatingmargin,afteramortisationofacquiredintangibleassetsandexceptionalrestructuringand
acquisitionintegrationcosts,was13.2%,down1.8percentagepoints,reflectingintangibleassetamortisationof
theChoicePointacquisitionandacquisitionintegrationcosts.
TheUSLegalbusinesssawrevenuesdecline6%atconstantcurrencies,or4%beforechangesinrevenue
recognitioninMartindaleHubbell,largelydrivenbyweaknessincorporate,governmentandacademicmarketsand
cutbacksbylawfirmsondirectoryspend. Thecorelawfirmbusinessheldupwell,withrevenuesflat,despitethe
significantimpactoftheeconomicdownturnonthelegalindustry.Thisreflectsthecontinuingdemandforlegal
researchinformationservicesandgrowthinworkflowsolutionsparticularlyinlitigationservices.
TheMartindale
Hubbell
lawyer
directory
listings
business
saw
revenues
down
17%
on
alike
for
like
basis
as
law
firmscutbackondirectorymarketing. InrecognitionofMartindaleHubbellstransformationintoawebmarketing
servicescompany,alllistingrevenuesin2009havebeenattributedtotheonlinelistingsandrecognisedrateably
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Reed Elsevier 2009 Results Announcement 8
Operatingandfinancialreview
overthe
listing
period;
print
directories
are
no
longer
provided
except
as
separately
ordered
by
customers.
The
changeintimingofrevenuerecognitionhasaonetimeadverseeffectin2009.
Goodprogressisbeingmadeindevelopingthenextgenerationoflegalresearchproducts,andtheadvancedback
officeinfrastructuretosupportthem,todeliveranintegratedandsuperiorcustomerexperienceacrosslegal
research,workflowtools,practicesolutionsandclientdevelopment. Progressiveproductintroductionsoverthe
nextfewyearswillcombineadvancedtechnologywithenrichedcontentandsophisticatedanalyticsand
applications. LexisNexisgoalistodelivernotjustbettersearchresults,butbetteroutcomesforcustomers.In
addition,salescoverageisbeingexpandedandmoreintuitiveuserinterfacesandexpandedlitigationworkflow
toolsarebeingaddedtothecurrentoffering. Thiswillresultinahigherongoinglevelofcapitalexpenditureand
lowermarginthroughcontinuingdevelopmentspendandwilloverthelongertermdrivegrowthandoperational
efficiencies.
Government,corporateandacademicmarketswere6%lowerwithcustomerbudgetsunderpressureandreduced
transactionalactivity,impactinginparticularthenewsandbusinessinformationdatabases.
TheLexisNexisInternationalbusiness,iethenonUSbusinesses,sawrevenuesdecline3%atconstantcurrencies,or
1%underlyingbeforetakingaccountofthesaleintheprioryearoftheLatinAmericanbusiness. Thepressureson
thelegalservicesindustryinternationallymirrorthoseseenintheUS,particularlyintheUKwiththeimpactmostly
onprintproductsalesascustomersincreasinglyrelyontheonlineservice. Withlesspenetrationofonlineservices
ininternationalmarketsthanintheUS,onlinerevenueshavecontinuedtogrowstronglyat9%asfirmsseekto
increasetheireffectiveness. Thishaslargelybeenoffsetbythedeclineinprintsales.
TheRiskSolutionsbusinesssawrevenuesalmostdoubleatconstantcurrenciesincludingafullyearcontributionof
theChoicePointbusinessacquiredinSeptember2008. Underlyingrevenues,beforeChoicePoint,were2%lower
reflectingtheslowdownintransactionalactivityintheUSeconomy,largelyoffsetbystronggrowthingovernment
markets.
TheChoicePointbusinesssawrevenuesup1%onaproformabasiswithadjustedoperatingprofitsup44%,
deliveringafirstyearposttaxreturnof6.0%onthe$4.1billionpurchase. Strongrevenuegrowthintheinsurance
segment,up10%,wasdrivenbyhightransactionalactivityinautoandpropertyinsurancemarketsandby
increasingsalesofmorepowerfuldataandanalyticsproducts. Thisstronggrowthininsuranceandcostsavings
fromtheintegrationofChoicePointandLexisNexisdrivetheincreasedprofitability. The1%proformarevenue
growthis
after
a13%
decline
in
the
non
insurance
businesses,
principally
in
pre
employment
screening,
reflecting
theeconomicdownturn. Significantcostactionsinthescreeningbusinesslimitedtheprofitimpactofthisdecline.
ThebusinesstrendsseeninUSlegalandinternationalmarketsareexpectedtocontinueinto2010reflectingthe
continuingpressuresonthelegalindustryandthesubscriptionnatureofmuchoftherevenue. Goodgrowth
momentumisexpectedintheinsurancesegmentinRiskSolutionsandscreeningmarketsshouldstabiliseastheUS
economyrecovers. Theoveralladjustedoperatingmarginisexpectedtobelower,reflectingtheeffectsofaweak
revenueenvironmentandincreasesinspendonproductdevelopment,infrastructure,andsalesandmarketingin
theLegalbusiness,partlymitigatedbycontinuingcostactionsandthegrowingprofitabilityoftheChoicePoint
business.
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Reed Elsevier 2009 Results Announcement 9
Operatingandfinancialreview
ReedExhibitions
% %
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstant
currenciesUnderlying
growthrates
Revenue 638 707 10% 715 891 20% 21% 22%
Adjustedoperatingprofit 152 183 17% 170 230 26% 28% 31%
Adjustedoperatingmargin 23.8% 25.9% 2.1pts 23.8% 25.9% 2.1pts
ReedExhibitionshadadifficultyearwithcustomerscuttingbackonpromotionalexpenditureandthenetcycling
outofbiennialexhibitions. Therevenuedecline,mitigatedinpartbysubstantialcostsavings,hasreduced
adjustedoperatingmargins.
Revenuesandadjustedoperatingprofitsweredown21%and28%respectivelyatconstantcurrencies,or22%and
31%beforeminorportfoliochanges. Adjustedforbiennialshowcycling,underlyingrevenuesandadjusted
operatingprofitswere13%and18%lowerrespectively. Significantcostsavingsweremadethroughmanagement
streamlining,operationalefficienciesandheadcountreductionsacrossthebusiness. Theoperatingmargin,after
amortisationofacquiredintangibleassetsandexceptionalrestructuringcosts,was17.9%,down0.8percentage
points,beforegoodwillimpairmentchargesoncertainminorshows.
Salesofexhibitionspaceandancillaryserviceswereloweracrossallmajorgeographies. Therewasalsoadecline
inpayingdelegatesatthesmallnumberofshowswhichchargesignificantfeesforparticipation. Acrossthe
regions,annualshowrevenueswere14%lowerintheUS,13%inJapan,and17%inEurope. Theshowsoverall
havehoweverbeensuccessfulwithattendancesremainingresilientandstrongsatisfactionexpressedbyexhibitorsandvisitors.
Whilst2010willseethebenefitofthenetcyclinginofbiennialshows,bookingsgoingintotheyearremain
cautiouswithexhibitorscommittinglaterthanusualandrevenuesfromannualshowsareexpectedtobelower.
ReedBusinessInformation
% %
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstantcurrencies
Underlyinggrowthrates
Revenue
UK 263 306 14% 295 386 24% 15% 16%
US 246 288 15% 275 363 24% 27% 27%
NL 198 202 2% 222 254 13% 13% 13%
International 184 191 4% 206 241 15% 14% 13%
891 987 10% 998 1,244 20% 18% 18%
Adjustedoperatingprofit 89 126 29% 99 159 38% 35% 34%
Adjustedoperatingmargin 10.0% 12.8% 2.8pts 10.0% 12.8% 2.8pts
ReedBusinessInformationhadaverytoughyearwithadvertisingmarketsseverelyimpactedbytheeconomic
recession. Printsubscriptionrevenuesdeclinedlessanddataservicessawgoodgrowth. Adjustedoperating
marginswerelowerduetotherevenuedeclinepartlymitigatedbysubstantialcostsavings.
Revenuesandadjustedoperatingprofitswere18%and35%lowerrespectivelyatconstantcurrencies,or18%and
34%beforeacquisitionsanddisposals. Totalunderlyingcostswere15%lowerdrivenbysubstantialcostsavings.
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Reed Elsevier 2009 Results Announcement 10
Operatingandfinancialreview
Theoperatingmargin,afteramortisationofacquiredintangibleassetsandrestructuringcosts,wasnegative2.4%
beforeimpairmentcharges,down8.0percentagepointsreflectingtherevenuedeclineandsignificantlyhigherexceptionalrestructuringcosts.
Overalladvertisingrevenues(47%ofRBIrevenues)weredown29%,withonlineadvertisingrevenuesdown14%
andprintadvertisingrevenuesdownsubstantiallymoreat37%. Printsubscriptionandotherrevenuesdeclined
10%. Incontrast,dataservicesrevenues(17%ofRBIrevenues)grew10%.
ThecontrolledcirculationmagazinesandcertainotherprinttitlesintheUS,accountingfor47%ofUSrevenues,
arebeingsold,restructuredinanticipationofsaleorclosed. Varietyandtheentertainmentgroup,RCD(ReedConstructionData),andtheBuyerZoneleadgenerationbusinessarebeingretained. Thesebusinessessawrevenuesdecline16%.
Theimperativeistocontinuerestructuringthemagazinesbusinessandtheadvertisingdrivenportfolio;toalign
thecostbasewithreducedrevenueexpectations;andtofurthergrowthedataservicesbusiness.
Advertisingmarketsremaindifficultandlatecycleeffectscontinuetoputpressureonsubscriptions.Dataservices
continuetogrowwell. 2010willbeanotherdifficultyearforRBIwithfurtherrevenuedeclines.
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Reed Elsevier 2009 Results Announcement 11
Operatingandfinancialreview
FINANCIALREVIEW
REEDELSEVIERCOMBINEDBUSINESSES
CurrencyTheaverageexchangeratesintheyearsawtheUSdollarstrongeragainstbothsterlingandtheeuro,whilsttheeurowasstrongeragainststerling. Thisgivesafavourableeffectontranslationofreportedresultsexpressedinsterlingwithrelativelyminoreffectswhenexpressedineuros.Reportedfigures
%
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstant
currencies
Reportedfigures
Revenue 6,071 5,334 +14% 6,800 6,721 +1% +0%
Reportedoperatingprofit 787 901 13% 881 1,135 22% 22%
Reportedpretaxprofit 435 617 29% 487 777 37% 36%
Reportedprofitattributable 391 476 18% 438 587 25% 26%(Thereportedfiguresincludeamortisationandimpairmentofacquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,disposalsandothernonoperatingitems,relatedtaxeffectsandmovementsindeferredtaxassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm.AdjustedfiguresthatexcludetheseitemsareusedbyReedElsevierasadditionalperformancemeasuresandarediscussedlaterbelow.)Revenuewas6,071m/6,800m(2008:5,334m/6,721m),up14%expressedinsterlingandup1%whenexpressedineuros,
includingafullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008. Atconstantexchangerates,
revenuewasflatcomparedwiththeprioryear. Underlyingrevenues,iebeforeacquisitionsanddisposals,were6%lower
principallyreflectingtheimpactoftheglobalrecessiononourmarkets,mostparticularlythesignificantdownturnin
advertisingandpromotionmarketsinReedExhibitionsandReedBusinessInformation(RBI).
Reportedoperatingprofit,afteramortisationandimpairmentofacquiredintangibleassetsandgoodwillandexceptional
restructuringandacquisitionrelatedcosts,was787m/881m(2008:901m/1,135m),down13%insterlingand22%in
euros.ThedecreaseprincipallyreflectsintangibleassetandgoodwillimpairmentchargesrelatingtoRBIandincreased
restructuringandacquisitionintegrationspend,partlyoffsetinsterlingbycurrencytranslationeffects.
Theamortisation
charge
in
respect
of
acquired
intangible
assets,
including
the
share
of
amortisation
in
joint
ventures,
amountedto368m/412m(2008:281m/354m),up87m/58masaresultofChoicePointandother2008acquisitions
and,insterling,currencytranslationeffects.Chargesforimpairmentofacquiredintangibleassetsandgoodwillwere
177m/198m(2008:9m/11m)principallyrelatingtoRBIandcertainminorexhibitionsbusinesses.
Exceptionalrestructuringcostsincurredamountedto182m/204m(2008:152m/192m)relatingtothemajorrestructuring
programmesannouncedinFebruary2008and2009andincludedseverance,outsourcingmigrationandrelatedvacant
propertycosts. Acquisitionrelatedcostsamountedto48m/54m(2008:27m/34m)principallyinrespectofthe
integrationoftheChoicePointbusinessintoLexisNexis.
Disposalsandothernonoperatinglossesof61m/68m(2008:92m/116m)compriserestructuringcostsinrelationto
assetsheldforsaleandrelatedclosures,inparticularRBIUScontrolledcirculationtitles,lessnetgainsondisposalsofminor
titlesand
investments
and
fair
value
increases
in
the
portfolio
of
venture
capital
investments.
Netfinancecostswerehigherat291m/326m(2008:192m/242m,including18m/23mofacquisitionrelatedfees
incurredinconnectionwithChoicePointacquisitionfinancing)principallyreflectingafullyearsfinancingoftheChoicePoint
acquisitionand,insterling,currencytranslationeffects,lessthebenefitoftheJuly2009shareplacingandfreecashflow.
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Reed Elsevier 2009 Results Announcement 12
Operatingandfinancialreview
Thereported
profit
before
tax,
including
amortisation
and
impairment
of
acquired
intangible
assets
and
goodwill,
exceptional
restructuringandacquisitionrelatedcosts,andnonoperatingitems,was435m/487m(2008:617m/777m).
Thereportedtaxchargewaslowerat40m/45m(2008:155m/195m)reflectingthereducedreportedprofitbeforetax,
geographicmixeffects,taxcreditsonpriorperioddisposalsof34m/38mandthefullyeardeferredtaxcrediton
amortisationofthedeferredtaxliabilityestablishedonacquisitionofChoicePointinrelationtoitsintangibleassets.
DiscontinuedoperationsNetprofitfromdiscontinuedoperationsof18m/10mintheprioryearcomprisedthegainondisposaloftheremaining
EducationDivisionbusinessesof67m/72mlesstaxesof49m/62m.
TotaloperationsThereportedattributableprofitof391m/438mcompareswith476m/587min2008,reflectingthelowerreportedprofit
beforetaxpartlymitigatedbylowertaxcostsand,insterling,currencytranslationeffects.
Adjustedfigures
%
2009m
2008m
Change%
2009m
2008m
Change%
Changeatconstantcurrencies
Adjustedfigures
Adjustedoperatingprofit 1,570 1,379 +14% 1,758 1,737 +1% +1%
Adjustedoperatingmargin 25.9% 25.9% 25.9% 25.9%Adjustedpretaxprofit 1,279 1,205 +6% 1,432 1,518 6% 6%
Adjustedprofitattributable 982 919 +7% 1,099 1,159 5% 5%
Adjustedoperatingcashflow 1,558 1,407 +11% 1,745 1,773 2% 2%
Cashflowconversion 99% 102% 99% 102%
(AdjustedfiguresareusedbyReedElsevierasadditionalperformancemeasuresandarestatedbeforetheamortisationandimpairmentofacquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,and,inrespectofearnings,reflectataxratethatexcludestheeffectofmovementsindeferredtaxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm.ExceptionalrestructuringcostsrelatetothemajorrestructuringprogrammesannouncedinFebruary2008and2009.Acquisitionrelatedcostsrelatetoacquisitionintegrationandfeesincurredinconnectionwithacquisitionfinancing. Profitandlossondisposalsandothernonoperatingitemsarealsoexcludedfromtheadjustedfigures.Reconciliationsbetweenthereportedandadjustedfiguresaresetoutinnote5tothecombinedfinancialinformation.Comparisonatconstantexchangeratesuses2008fullyearaverageandhedgeexchangerates.)Adjustedoperatingprofitwas1,570m/1,758m(2008:1,379m/1,737m),up14%expressedinsterlingandup1%ineuros,
includingafullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008.Atconstantexchangerates,
adjustedoperatingprofitswereup1%.Underlyingadjustedoperatingprofits,iebeforeacquisitionsanddisposals,were9%
lowerreflectingtheoperationalgearingonunderlyingrevenuedeclinesof6%. Underlyingcostswere227m/254mlower
thanin2008or5.4%,atconstantcurrencies,throughsignificantcostactionsacrossthebusinessincludingtheexceptional
restructuringprogrammes.
Theoveralladjustedoperatingmarginwasunchangedat25.9%(2008:25.9%). Anunderlyingmargindeclineof0.8percentage
pointswaslargelyoffsetbythestronggrowthinprofitabilityandadjustedoperatingmarginatChoicePoint.
Thenet
pension
expense
was
18m/20m
(2008:
36m/46m).
Excluding
the
unallocated
net
pension
financing
credit,
the
netpensionexpensewaslowerat24m/27m(2008:75m/95m),reflectingthehigherdiscountratesandlowerinflation
assumptionsatthebeginningoftheyearcomparedwiththeprioryearandpensioncurtailmentcreditsof43m/48marising
fromchangestopensionplanbenefitsandstaffreductions,partiallyoffsetinsterlingbycurrencytranslationeffects.Thenet
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Reed Elsevier 2009 Results Announcement 13
Operatingandfinancialreview
pensionfinancingcreditwas6m/7m(2008:39m/49m)reflectingthelowermarketvalueofschemeassetsatthe
beginningof
the
year
compared
with
ayear
before.
The
charge
for
share
based
payments
was
17m/19m
(2008:
46m/58m)reflectingreducedvestingassumptionsforlongtermincentiveschemes.Restructuringcosts,otherthanin
respectoftheexceptionalrestructuringprogrammeandacquisitionintegration,were20m/22m(2008:13m/16m).
Netinterestexpensewas291m/326m(2008:174m/219mbeforeacquisitionrelatedfinancingfees)principallyreflectinga
fullyearsfinancingoftheChoicePointacquisitionand,insterling,currencytranslationeffects,lessthebenefitoftheJuly2009
shareplacingandfreecashflow.
Adjustedprofitbeforetaxwas1,279m/1,432m(2008:1,205m/1,518m),up6%expressedinsterlinganddown6%when
expressedineuros.Atconstantexchangerates,adjustedprofitbeforetaxwas6%lowerreflectingtheflatadjustedoperating
profitperformanceandhighernetinterestexpense.
Theeffective
tax
rate
on
adjusted
profit
before
tax
at
22.9%
was
marginally
lower
than
the
rate
in
2008
reflecting
financing
efficienciesandgeographicmixeffects.Theeffectivetaxrateonadjustedprofitbeforetaxexcludesmovementsindeferred
taxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm,andmorecloselyalignswithcashtaxcosts.
Adjustedoperatingprofitsandtaxationaregrossedupfortheequityshareoftaxesinjointventures.
Theadjustedprofitattributabletoshareholdersof982m/1,099m(2008:919m/1,159m)wasup7%expressedinsterling
and5%lowerineuros.Atconstantexchangerates,adjustedprofitattributabletoshareholderswasdown5%.
Cashflows
Adjustedoperatingcashflowwas1,558m/1,745m(2008:1,407m/1,773m),up11%whenexpressedinsterlingand2%
lowerineuros,ordown2%atconstantcurrencies.
Therateofconversionofadjustedoperatingprofitsintocashflowwasveryhighat99%(2008:102%).Thesmalldeclinein
adjustedoperatingcashflowatconstantcurrenciesreflectsthe1%increaseinadjustedoperatingprofitsatconstant
currenciesandtheslightlylowercashflowconversionratethantheprioryearsrecordlevel.
Capitalexpenditureincludedwithinadjustedoperatingcashflowwas242m/271m(2008:172m/217m),including
164m/184m(2008:115m/145m)inrespectofcapitaliseddevelopmentcostsincludedwithininternallygenerated
intangibleassets.TheincreasereflectsafullyearofChoicePointcapitalexpendituresandincreasedinvestmentinproduct
platformsandrelatedinfrastructure,and,insterling,currencytranslationeffects.
Freecashflowafterinterestandtaxationwas1,051m/1,177m(2008:999m/1,259m)beforeexceptionalrestructuring
andacquisitionrelatedspend. Theincreaseinsterlingreflectsthecurrencytranslationbenefitincludedinadjustedoperating
cashflow,
partially
offset
by
higher
interest
payments.
When
expressed
in
euros,
the
decrease
reflects
the
higher
interest
paymentsandthesmalldeclineinadjustedoperatingcashflow.
Exceptionalrestructuringspendwas124m/139m(2008:72m/91m)principallyrelatingtoseverance,outsourcing
migrationandvacantpropertycosts. Paymentsmadeinrespectofacquisitionintegrationamountedto45m/51m(2008:
27m/34m)principallyinrespectoftheChoicePointacquisition. Taxpaidintheyearwasreducedby36m/40m(2008:
32m/40m)inrelationtotherestructuringandacquisitionrelatedspend.
Ordinarydividendspaidtoshareholdersintheyear,beingthe2008finaland2009interimdividends,amountedto
457m/512m(2008:418m/528m). In2008,thespecialdistributionpaidtoshareholdersinJanuary2008fromthenet
proceedsoftheEducationDivisiondisposalamountedto2,013m/2,690m(including27m/35mpaidtotheemployee
benefittrust).
Freecashflowafterdividendsandexceptionalrestructuringandacquisitionintegrationspendwas461m/515m(2008:
496m/625m). Spendonacquisitionswas94m/105m,including56m/63mofpaymentsinrespectofChoicePoint
changeofcontrolandothernonoperatingliabilitiesassumedonacquisition,and29m/32minrespectofdeferred
considerationonprioryearacquisitions. Includingdeferredconsiderationpayable,anamountof17m/19mwascapitalised
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Reed Elsevier 2009 Results Announcement 14
Operatingandfinancialreview
intheyearasacquiredintangibleassetsand6m/7masgoodwill. Thetotalconsiderationinrespectofacquisitionsmadein
theyear
was
9m/10m.
Tax
paid
in
the
year
was
reduced
by
53m/59m
in
relation
to
settlement
of
outstanding
ChoicePoint
shareoptionsonacquisitionandotherliabilities.
Proceeds,netofexpenses,fromshareplacingsbytheparentcompaniesinJuly2009were829m/928m. Noshare
repurchasesweremadebytheparentcompaniesintheyear(2008:40m/50m)andnosharesoftheparentcompanieswere
purchasedbytheemployeebenefittrust(2008:54m/68m).Netproceedsfromtheexerciseofshareoptionswere5m/6m
(2008:54m/68m).
Debt
Netborrowingsat31December2009were3,931m/4,402m(2008:5,726m/5,898m),adecreaseof1,795m/1,496m
since31December2008. ThedecreaseprincipallyreflectstheJuly2009shareplacings,whichraised829m/928mnetof
expenses,free
cash
flow
and
currency
translation
effects.
Expressed
in
sterling,
currency
translation
effects
decreased
net
borrowingsby559m,reflectingtheimpactoftheweakeningoftheUSdollar,from$1.45:1atthebeginningoftheyearto
$1.62:1attheend,onthelargelyUSdollardenominatednetdebt. Expressedineuros,currencytranslationdifferences
decreasednetdebtby112m,largelyreflectingtheimpactoftheweakeningofthedollar,from$1.41:1atthebeginningof
theyearto$1.44:1attheend.
Grossborrowingsafterfairvalueadjustmentsat31December2009amountedto4,706m/5,270m(2008:
6,142m/6,326m).Thefairvalueofrelatedderivativeassetswas41m/46m(2008:41m/42m).Cashbalancestotalled
734m/822m(2008:375m/386m).
Asat31December2009,aftertakingintoaccountinterestrateandcurrencyderivatives,atotalof75%ofReedElseviers
grossborrowings(equivalentto90%ofnetborrowings)wereatfixedrateswithaweightedaverageremaininglifeof5.7years
andinterest
rate
of
6.0%.
Netpensionobligations,iepensionobligationslesspensionassets,at31December2009were235m/263m(2008:
369m/380m).Thedecreasereflectstheimpactofhigherplanassetvalues,pensionbenefitcurtailmentsandcurrency
translationpartiallyoffsetbytheeffectsoflowerdiscountratesandanincreasedinflationassumptionintheUKscheme.
Theratioofnetdebttoadjustedebitda(earningsbeforeinterest,tax,depreciationandamortisation)at31December2009
was2.2x(2008:2.7x,proformaforChoicePoint),and2.9x(LTMJune2009:3.6x;2008:3.3x;proformaforChoicePoint)ona
pensionsandleaseadjustedbasis. ReedElsevierstargetisaratioofnetdebttoadjustedebitdaof2.03.0x(onapensions
andleaseadjustedbasis)overthelongerterm,consistentwithasolidinvestmentgradecreditrating.
Liquidity
Fixedratetermdebtof$1,500m,600mand300mandfloatingratetermdebtof50m,totalling1,836m/2,056m,were
issuedintheyearinmaturitiesrangingfrom4to10years,withaweightedaveragecouponof7.5%(beforetakinginto
accountfixedtofloatinginterestrateswaps),andtheproceedsusedtorepaythemajorityoftheChoicePointacquisition
facility,beingbankloansmaturingin2010and2011. ThenetproceedsoftheJuly2009equityplacingswereusedtorepaythe
outstandingChoicePointacquisitionfacilityandreduceshorttermcommercialpaperborrowings.
At31December2009,ReedElsevierhadinplacea$2.5bncommittedbankfacilitymaturinginMay2010,providingbackup
forcommercialpaperborrowingsandothershorttermdebt,noneofwhichwasdrawn,anda$2.0bncommittedbankfacility,
forwardstartinginMay2010andmaturinginMay2012. InJanuary2010the$2.5bncommittedfacilitymaturinginMay2010
wascancelledandthestartdateofthe$2.0bncommittedfacilitybroughtforwardtostartimmediately. Thisbackupfacility
providessecurityoffundingfor$2.0bnofshorttermdebttoMay2012.
Aftertakingaccountofthesecommittedbankfacilitiesandavailablecashresources,noborrowingsmaturein2010and2011,
730m/817mofborrowingsmaturein2012and3,201m/3,585mmaturein2013andbeyond.Thestrongfreecashflowof
thebusiness,theavailableresourcesandbackupfacilities,andReedElseviersabilitytoaccessdebtcapitalmarketsare
expectedtoprovidesufficientliquiditytorepayorrefinanceborrowingsastheymature.
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Reed Elsevier 2009 Results Announcement 15
Operatingandfinancialreview
Capitalemployed
and
returns
Thecapitalemployedat31December2009was11,918m/13,348m (2008:13,125m/13,470m)afteraddingback
accumulatedamortisationandimpairmentofacquiredintangibleassetsandgoodwill. Thedecreaseof1,207m/122m
principallyreflectstheimpactofcurrencytranslationatyearendrates.
Thereturnonaveragecapitalemployedintheyearwas10.4%(2008:12.1%). Thisisbasedonadjustedoperatingprofitsfor
theyear,lesstaxattheeffectiverate,andtheaverageofthecapitalemployedatthebeginningandendoftheyear,
retranslatedattheaverageexchangerates,adjustedformajoracquisitiontimingandtoexcludethegrossuptogoodwillin
respectofdeferredtaxliabilitiesestablishedonacquisitionsinrelationtointangibleassets. Thereductioninthereturn
reflectstheinitiallydilutiveeffectonreturnsoftheChoicePointacquisitionandtheloweradjustedoperatingprofitsinthe
businessexcludingChoicePoint.
Acquisitionstypicallydilutetheoverallreturninitially,butbuildtodeliverlongertermreturnswelloverReedElseviers
averageforthebusiness. Therecentacquisitionsmadeintheyears2007and2008aredeliveringposttaxreturnsin2009of
10%and6%respectively. TheposttaxreturnonChoicePointwas6%intheyear,whichcompareswith4%intheprioryearon
aproformabasis.
PARENTCOMPANIES
ReedElsevierPLC ReedElsevierNV
2009pence
2008pence
Change%
2009
2008
Change%
Adjustedearningspershare 45.9p 44.6p +3% 0.79 0.87 8%
Reportedearnings
per
share
17.2p
22.1p
22%
0.32 0.44
27%
Ordinarydividendpershare 20.4p 20.3p 0% 0.400 0.404 1%
Fortheparentcompanies,ReedElsevierPLCandReedElsevierNV,adjustedearningspersharewererespectivelyup3%at
45.9p(2008:44.6p)anddown8%at0.79(2008:0.87). Atconstantratesofexchange,theadjustedearningspershareof
bothcompaniesdecreasedby9%.
TheJuly2009equityplacingshadadilutiveeffectonadjustedearningspershareofapproximately4%in2009,takinginto
accounttheinterestexpensesavedontheborrowingsrepaidfromtheproceedsoftheequityplacingsandtheincreaseinthe
averagenumberofparentcompanysharesinissue.Thefurtherdilutiveeffectonadjustedearningspersharein2010is
expectedtobeapproximately4%(8%inthefirsthalf).
Thereported
earnings
per
share
for
Reed
Elsevier
PLC
shareholders
was
17.2p
(2008:
22.1p)
and
for
Reed
Elsevier
NV
shareholderswas0.32(2008:0.44).Thedeclineprincipallyreflectstheintangibleassetandgoodwillimpairmentchargesin
RBI,higherexceptionalrestructuringandacquisitionintegrationcosts,andthedilutiveeffectoftheequityplacing.
Theequalisedfinaldividendsproposedare15.0ppershareforReedElsevierPLCand0.293pershareforReedElsevierNV,
unchangedandup1%respectivelycomparedwiththeprioryear.Thisgivestotaldividendsfortheyearof20.4p(2008:20.3p)
and0.400(2008:0.404),up0.5%anddown1%on2008respectively. Thedifferenceingrowthratesintheequalised
dividendsreflectschangesintheeuro:sterlingexchangeratesinceprioryeardividendannouncementdates.
Dividendcover,basedonadjustedearningspershareandthetotalinterimandproposedfinaldividendsfortheyear,is2.3
timesforReedElsevierPLCand2.0timesforReedElsevierNV. Thedividendpolicyoftheparentcompaniesis,subjectto
currencyconsiderations,togrowdividendsbroadlyinlinewithadjustedearningspersharewhilstmaintainingdividendcover
(beingthe
number
of
times
the
annual
dividend
is
covered
by
the
adjusted
earnings
per
share)
of
at
least
two
times
over
the
longerterm.
InJuly2009,ReedElsevierPLCplaced109.2mordinarysharesat405ppershareforproceeds,netofissuecosts,of435m
(487m)andReedElsevierNVplaced63.0mordinarysharesat7.08persharefornetproceedsof441m(394m). The
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Reed Elsevier 2009 Results Announcement 16
Operatingandfinancialreview
numbersofordinarysharesissuedrepresented9.9%oftheissuedordinarysharecapitaloftherespectiveparentcompanies
priorto
the
placings.
On18January2008,aspecialdistributionwaspaidtoshareholdersintheequalisationratiorepresentingthenetproceedsof
thesaleoftheEducationdivision. Thedistributionwas82.0ppershareforReedElsevierPLCand1.767pershareforReed
ElsevierNVandamountedto2,013m/2,690minaggregate. Thespecialdistributionwasaccompaniedbyaconsolidationof
theordinarysharecapitalsofReedElsevierPLCandReedElsevierNVonthebasisof58newordinarysharesforevery67
existingordinaryshares,representinga13.4%consolidationofordinarysharecapitalofbothcompanies.
Noshareswererepurchasedintheyear.Sharesrepurchasedintheprioryeartotalled3.2mordinarysharesofReedElsevier
PLCand2.1mordinarysharesofReedElsevierNV.
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Reed Elsevier 2009 Results Announcement 17
PrincipalRisks
TheprincipalrisksfacingReedElsevierarisefromthehighlycompetitiveandrapidlychangingnatureofourmarkets,the
increasinglytechnological
nature
of
our
products
and
services,
the
international
nature
of
our
operations,
legislative,
fiscal
and
regulatorydevelopments,andeconomicconditionsinourmarkets.Certainbusinessescouldalsobeaffectedbytheimpacton
publiclyfundedandothercustomersofchangesinfundingandbycyclicalpressuresonadvertisingandpromotionalspending
orthroughtheavailabilityofalternativefreesourcesofinformation.
ReedElsevierhasestablishedriskmanagementpracticesthatareembeddedintotheoperationsofthebusinessesbasedon
theframeworkininternalcontrolissuedbytheCommitteeofSponsoringOrganisationsoftheTreadwayCommission(COSO),
andarereviewedbytheAuditCommitteesandBoards.Importantspecificrisksthathavebeenidentifiedandarebeing
addressedinclude:
Demandforourproductsandservicesmaybeimpactedbyfactorsbeyondourcontrolsuchastheeconomicenvironment
intheUnitedStatesandothermajoreconomies.Macroeconomic,politicalandmarketconditionsmayadverselyaffect
theavailability
of
short
and
long
term
funding,
volatility
of
interest
rates,
currency
exchange
rates
and
inflation.
ReedElseviersbusinessesaredependentonthecontinuedacceptancebyourcustomersofourproductsandservicesand
thevalueplacedonthem.Wecannotpredictwhethertherewillbechangesinthefuturewhichwillaffectthe
acceptabilityofourproducts,servicesandpricestoourcustomers.
Ourbusinessesoperateinhighlycompetitivemarkets.Thesemarketscontinuetochangeinresponsetotechnological
innovations,changinglegislation,regulatorychanges,theentranceofnewcompetitorsandotherfactors.Wecannot
predictwithcertaintythechangesthatmayoccurandtheeffectofthosechangesonthecompetitivenessofour
businesses.Wecontinuetoinvestsignificantresourcestofurtheradapttothechangingmarketandcompetitive
environment.Thereisnoassurancethatthisinvestmentwillproducesatisfactorylongtermreturns.
ReedElseviers
businesses
are
increasingly
dependent
on
electronic
platforms
and
networks,
primarily
the
internet,
for
deliveryofproductsandservices.Althoughplansandproceduresareinplacetoreducesuchrisks,ourbusinessescould
beadverselyaffectediftheirelectronicdeliveryplatformsandnetworksexperienceasignificantfailure,interruption,or
securitybreach.
Ourproductsandservicesarelargelycomprisedofintellectualpropertycontentdeliveredthroughavarietyofmedia. We
relyontrademark,copyright,patentandotherintellectualpropertylawstoestablishandprotectourproprietaryrightsin
theseproductsandservices.Thereisariskthatourproprietaryrightscouldbechallenged,limited,invalidatedor
circumvented.
Anumberofourbusinessesrelyextensivelyuponcontentanddatafromexternalsourcestomaintainourdatabases.Dataisobtainedfrompublicrecords,governmentalauthorities,customersandotherinformationcompanies,includingcompetitors.Thedisruptionorlossofdatasourcesinthefuture,becauseofchangesinthelaworbecausedatasuppliersdecidenottosupplythem,couldadverselyaffectourbusinessifwewereunabletoarrangeforsubstitutesourcesinatimelymanneroratall.
Thescientific,technicalandmedical(STM)primarypublicationsofElsevier,likethoseofmostofourSTMcompetitors,are
publishedonapaidsubscriptionbasis.Therehasbeendebateinthegovernment,academicandlibrarycommunities,
whicharetheprincipalcustomersforourSTMpublications,regardingwhethersuchpublicationsshouldbefunded
insteadthroughfeeschargedtoauthorsandfromgovernmentalandothersubsidiesormadefreelyavailableaftera
periodfollowingpublication.IfthesemethodsofSTMpublishingarewidelyadoptedormandated,itcouldadversely
affectourrevenuefrompaidsubscriptionpublications.
Neworganisationalandoperationalstructuresarebeingdevelopedwithincreasedfocusonoutsourcingandoffshoring
functions.Thefailureofthirdpartiestowhomwehaveoutsourcedactivitiescouldadverselyaffectourbusiness
performance,reputation
and
financial
condition.
Weoperateanumberofpensionschemesaroundtheworld,thelargestschemesbeingofthedefinedbenefittypeinthe
UK,theUSandtheNetherlands.Theassetsandobligationsassociatedwithdefinedbenefitpensionschemesare
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Reed Elsevier 2009 Results Announcement 18
PrincipalRisks
particularlysensitivetochangesinthemarketvaluesofassetsandthemarketrelatedassumptionsusedtovaluescheme
liabilities.
Ourbusinessesoperateinover200locationsworldwideandourearningsaresubjecttotaxationinmanydiffering
jurisdictionsandatdifferingrates.Weseektoorganiseouraffairsinataxefficientmanner,takingaccountofthe
jurisdictionsinwhichweoperate.However,taxlawsthatapplytoReedElsevierbusinessesmaybeamendedbythe
relevantauthorities.Suchamendments,ortheirapplicationtoReedElsevierbusinesses,couldadverselyaffectour
reportedresults.
Weoftenacquireanddisposeofbusinessestoreshapeandstrengthenourportfolioandengageinrestructuringactivities.
Ifweareunabletogeneratetheanticipatedbenefitssuchasrevenuegrowth,synergiesand/orcostsavingsassociated
withtheseacquisitionsandrestructuringactivitiesthiscouldadverselyaffectourreputationandfinancialcondition.
Ifthe
ratings
of
our
long
term
debt
are
downgraded
in
the
future,
our
borrowing
costs
and
access
to
capital
may
be
adverselyaffected.Aratingisbaseduponinformationfurnishedbyusorobtainedbytherelevantratingagencyfromitsownsourcesandissubjecttorevision,suspensionorwithdrawalbytheratingagencyatanytime.Ratingagenciesmayreviewtheassignedratingsduetodevelopmentsthatarebeyondourcontrol.
TheReedElseviercombinedfinancialstatementsareexpressedinpoundssterlingandare,therefore,subjecttomovementsin
exchangeratesonthetranslationofthefinancialinformationofbusinesseswhoseoperationalcurrenciesareotherthan
sterling.TheUnitedStatesisourmostimportantmarketand,accordingly,significantfluctuationsintheUSdollarexchange
ratecouldsignificantlyaffectourreportedresults.
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Reed Elsevier 2009 Results Announcement 19
Combinedfinancialinformation
Combinedincome
statement
Fortheyearended31December2009
2009m
2008m
2009
m2008
m
Revenuecontinuingoperations 6,071 5,334 6,800 6,721
Costofsales (2,252) (1,916) (2,523) (2,414)
Grossprofit 3,819 3,418 4,277 4,307
Sellinganddistributioncosts (1,112) (1,053) (1,246) (1,327)
Administrationandotherexpenses (1,935) (1,482) (2,167) (1,868)
Operatingprofitbeforejointventures 772 883 864 1,112
Shareofresultsofjointventures 15 18 17 23
Operatingprofitcontinuingoperations 787 901 881 1,135
Financeincome 7 33 8 42
Financecosts (298) (225) (334) (284)
Netfinancecosts (291) (192) (326) (242)
Disposalsandothernonoperatingitems (61) (92) (68) (116)
Profitbeforetaxcontinuingoperations 435 617 487 777
Taxation (40) (155) (45) (195)
Netprofitfromcontinuingoperations 395 462 442 582
Netprofitfromdiscontinuedoperations 18 10
Netprofitfortheyear 395 480 442 592
Attributableto:
Parentcompaniesshareholders 391 476 438 587
Noncontrolling
interests
4 4
4 5
Netprofitfortheyear 395 480 442 592
Adjustedprofitfiguresarepresentedinnotes2and5asadditionalperformancemeasures.
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Reed Elsevier 2009 Results Announcement 20
Combinedfinancialinformation
Combinedstatement
of
comprehensive
income
Fortheyearended31December2009
2009
m2008
m
2009m
2008m
Netprofitfortheyear 395 480 442 592
Exchangedifferencesontranslationofforeignoperations (122) 340 (50) 59
Cumulativeexchangedifferencesondisposalofforeignoperations 27 54
Actuarialgains/(losses)ondefinedbenefitpensionschemes 6 (347) 7 (437)
Fairvaluemovementsonavailableforsaleinvestments (9) (11)
Cumulativefair
value
movements
on
disposal
of
available
for
sale
investments 1 1
Fairvaluemovementsoncashflowhedges 53 (243) 59 (306)
Transfertonetprofitfromhedgereserve(netoftax) 84 (14) 94 (18)
Taxrecogniseddirectlyinequity (25) 156 (28) 196
Othercomprehensive(expense)/income fortheyear (3) (90) 83 (463)
Totalcomprehensiveincomefortheyear 392 390 525 129
Attributableto:
Parentcompaniesshareholders 388 386 521 124
Noncontrollinginterests 4 4 4 5
Totalcomprehensiveincomefortheyear 392 390 525 129
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Reed Elsevier 2009 Results Announcement 21
Combinedfinancialinformation
Combinedstatement
of
cash
flows
Fortheyearended31December2009
2009
m2008
m 2009
m2008
m
Cashflowsfromoperatingactivitiescontinuingoperations Cashgeneratedfromoperations 1,604 1,452 1,796 1,830
Interestpaid (302) (222) (338) (280)
Interestreceived 9 43 10 54
Taxpaid (120) (215) (134) (271)
Netcashfromoperatingactivities 1,191 1,058 1,334 1,333
Cashflowsfrominvestingactivitiescontinuingoperations
Acquisitions (94) (2,161) (106) (2,747)
Purchasesofproperty,plantandequipment (78) (57) (87) (72)
Expenditureoninternallydevelopedintangibleassets (164) (115) (184) (145)
Purchaseofinvestments (3) (4) (3) (5)
Proceedsfromdisposalsofproperty,plantandequipment 4 5 4 6
(Netcosts)/proceedsofotherdisposals (2) 8 (2) 10
Dividendsreceivedfromjointventures 23 23 26 29
Netcashusedininvestingactivities (314) (2,301) (352) (2,924)
Cashflowsfromfinancingactivitiescontinuingoperations
Dividendspaidtoshareholdersoftheparentcompanies (457) (2,404) (512) (3,183)
Distributionstononcontrollinginterests (3) (3)
Increase/(decrease)in
bank
loans,
overdrafts
and
commercial
paper 107 (407)
120
(513)
Issuanceofotherloans 1,807 2,373 2,024 3,017
Repaymentofotherloans (2,862) (411) (3,206) (520)
Repaymentoffinanceleases (2) (56) (2) (71)
Redemptionofdebtrelatedderivativefinancialinstruments 62 78
Proceedsonissueofordinaryshares 834 54 934 68
Purchaseoftreasuryshares (94) (118)
Netcashusedinfinancingactivities (576) (883) (645) (1,242)
Netcashusedindiscontinuedoperations (48) (33)
Increase/(decrease)incashandcashequivalents 301 (2,174) 337 (2,866)
Movement
in
cash
and
cash
equivalents
Atstartofyear 375 2,467 386 3,355
Increase/(decrease)incashandcashequivalents 301 (2,174) 337 (2,866)
Exchangetranslationdifferences 58 82 99 (103)
Atendofyear 734 375 822 386
Adjustedoperatingcashflowfiguresarepresentedinnote5asadditionalperformancemeasures.
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Reed Elsevier 2009 Results Announcement 22
Combinedfinancialinformation
Combinedstatement
of
financial
position
Asat31December2009
2009
m2008
m
2009m
2008m
Noncurrentassets
Goodwill 4,339 4,901 4,860 5,048
Intangibleassets 3,632 4,404 4,068 4,536
Investmentsinjointventures 135 145 151 149
Otherinvestments 41 49 46 51
Property,plantandequipment 292 329 327 339
Netpension
assets
110 152 123
157
Deferredtaxassets 208 353 233 363
8,757 10,333 9,808 10,643
Currentassets
Inventoriesandprepublicationcosts 275 348 308 358
Tradeandotherreceivables 1,492 1,685 1,671 1,736
Derivativefinancialinstruments 71 76 79 78
Cashandcashequivalents 734 375 822 386
2,572 2,484 2,880 2,558
Assetsheldforsale 5 49 6 50
Totalassets 11,334 12,866 12,694 13,251
Currentliabilities
Tradeand
other
payables
2,471 2,769 2,768
2,852
Derivativefinancialinstruments 102 258 114 266
Borrowings 678 448 759 461
Taxation 479 554 536 571
Provisions 134 79 150 81
3,864 4,108 4,327 4,231
Noncurrentliabilities
Borrowings 4,028 5,694 4,511 5,865
Deferredtaxliabilities 1,272 1,525 1,425 1,570
Netpensionobligations 345 521 386 537
Provisions 61 35 69 36
5,706 7,775 6,391 8,008
Liabilitiesassociatedwithassetsheldforsale 5 2 6 2
Totalliabilities 9,575 11,885 10,724 12,241
Netassets 1,759 981 1,970 1,010
Capitalandreserves
Combinedsharecapitals 225 209 252 215
Combinedsharepremiums 2,807 2,529 3,144 2,605
Combinedsharesheldintreasury (698) (783) (782) (806)
Translationreserve (100) (14) 79 174
Othercombinedreserves (502) (988) (753) (1,207)
Combinedshareholdersequity 1,732 953 1,940 981
Noncontrollinginterests 27 28 30 29
Totalequity 1,759 981 1,970 1,010
ApprovedbytheboardsofReedElsevierPLCandReedElsevierNV,17February2010.
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Reed Elsevier 2009 Results Announcement 23
Combinedfinancialinformation
CombinedstatementofchangesinequityFor
the
year
ended
31
December
2009
Combinedsharecapitals
Combinedshare
premiums
Combinedsharesheldin
treasuryTranslation
reserve
Othercombined
reserves
Combinedshareholders
equity
Noncontrolling
interests Total equitym m m m m m m m
Balanceat1January2009 209 2,529 (783) (14) (988) 953 28 981
Totalcomprehensiveincomefor
theyear
(122) 510 388 4 392
Dividendsdeclared (457) (457) (3) (460)
Issueofordinaryshares,net
ofexpenses
20 395 419 834 834
Increasein
share
based
remunerationreserve
17
17
17
Settlementofshareawards 57 (60) (3) (3)
Exchangedifferenceson
translationofcapitaland
reserves (4) (117)
28
36
57
(2) (2)
Balanceat31December2009 225 2,807 (698) (100) (502) 1,732 27 1,759
Combinedsharecapitals
Combinedshare
premiums
Combinedsharesheldin
treasuryTranslation
reserve
Othercombined
reserves
Combinedshareholders
equity
Noncontrolling
interests Total equity
m
m m m m m
m
mBalanceat1January2008 197 2,143 (619) (145) 1,389 2,965 11 2,976
Totalcomprehensiveincome
fortheyear 367 19
386 4 390
Dividendsdeclared (2,404) (2,404) (2,404)
Issueofordinaryshares,net
ofexpenses 1 53
54 54
Increaseinsharesheldin
treasury
(94)
(94) (94)
Increaseinsharebased
remunerationreserve
46
46 46
Settlementofshareawards 8 (8)
Acquisitions 11 11
Exchangedifferenceson
translationof
capital
and
reserves 11 333
(78)
(236)
(30)
2 2
Balanceat31December2008 209 2,529 (783) (14) (988) 953 28 981
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Reed Elsevier 2009 Results Announcement 24
Combinedfinancialinformation
CombinedstatementofchangesinequityFor
the
year
ended
31
December
2009
Combinedsharecapitals
Combinedshare
premiums
Combinedsharesheldin
treasuryTranslation
reserve
Othercombined
reserves
Combinedshareholders
equity
Noncontrolling
interests Total equitym m m m m m m m
Balanceat1January2009 215 2,605 (806) 174 (1,207) 981 29 1,010
Totalcomprehensiveincome
fortheyear
(50) 571 521 4 525
Dividendsdeclared (512) (512) (3) (515)
Issueofordinaryshares,net
ofexpenses
22 442 470 934 934
Increasein
share
based
remunerationreserve
19
19
19
Settlementofshareawards 64 (67) (3) (3)
Exchangedifferenceson
translationofcapitaland
reserves 15 97 (40) (45) (27)
Balanceat31December2009 252 3,144 (782) 79 (753) 1,940 30 1,970
Combinedsharecapitals
Combinedshare
premiums
Combinedsharesheldin
treasuryTranslation
reserve
Othercombined
reserves
Combinedshareholders
equity
Noncontrolling
interests Total equity
m
m m m m m
m
mBalanceat1January2008 268 2,914 (842) (170) 1,862 4,032 15 4,047
Totalcomprehensiveincome
fortheyear
113
11
124 5 129
Dividendsdeclared (3,183) (3,183) (3,183)
Issueofordinaryshares,net
ofexpenses 1 67
68 68
Increaseinsharesheldin
treasury (118)
(118) (118)
Increaseinsharebased
remunerationreserve
58
58 58
Settlementofshareawards 10 (10)
Acquisitions 14 14
Exchangedifferenceson
translationof
capital
and
reserves (54) (376)
144
231
55
(5)
(5)
Balanceat31December2008 215 2,605 (806) 174 (1,207) 981 29 1,010
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Reed Elsevier 2009 Results Announcement 25
Notestothecombinedfinancialinformation
1
Basisof
preparation
TheReedElseviercombinedfinancialinformation(thecombinedfinancialinformation)representsthecombinedinterestsoftheReed
ElsevierPLCandReedElsevierNVshareholdersandencompassesthebusinessesofReedElsevierGroupplcandElsevierReedFinanceBV
andtheirrespectivesubsidiaries,associatesandjointventures,togetherwiththetwoparentcompanies,ReedElsevierPLCandReed
ElsevierNV(ReedElsevierorthecombinedbusinesses).
Thecombinedfinancialinformation,presentedincondensedform,hasbeenabridgedfromtheauditedcombinedfinancialstatementsfor
theyearended31December2009,whichhavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)as
adoptedbytheEuropeanUnionandasissuedbytheInternationalAccountingStandardsBoard.TheReedElsevieraccountingpoliciesunder
IFRSaresetoutintheReedElsevierAnnualReportsandFinancialStatements2008onpages88to92,exceptasdescribedbelow. The
combinedfinancialinformationhasbeenpreparedinaccordancewiththoseaccountingpolicies.Financialinformationispresentedinboth
sterlingandeuros.
Inthe
2009
financial
year,
IAS1
Presentation
of
Financial
Statements
(revised
2007),
IFRS8
Operating
Segments
and
amendments
to
IAS23BorrowingCostscameintoforceandhaveaccordinglybeenadoptedbyReedElsevier.IAS1(revised)hasresultedintherenamingof
certainoftheprimaryfinancialstatementsandrequiresthatthecombinedstatementofchangesinequityshowsthechangesineach
componentofequity.IFRS8requiresoperatingsegmentstobeidentifiedonabasisconsistentwithinternalmanagementstructureand
reporting,andhasnotresultedinachangetothesegmentspresented.IAS23requiresborrowingcoststhataredirectlyattributabletothe
acquisition,construction,orproductionofaqualifyingassettobecapitalisedandhasnotledtoanyborrowingcostsbeingcapitalisedinthe
yearended31December2009.Additionally,anumberofotherinterpretationsandotherminorrevisionstoaccountingstandardshavebeen
adoptedthatdonothaveasignificantimpactonReedElseviersaccountingpoliciesandreporting.
ThedirectorsofReedElsevierPLCandReedElsevierNV,havingmadeappropriateenquiries,considerthatadequateresourcesexistforthe
combinedbusinessestocontinueinoperationalexistencefortheforeseeablefutureandthat,therefore,itisappropriatetoadoptthegoing
concernbasisinpreparingthecombinedfinancialinformationfortheyearended31December2009.
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Reed Elsevier 2009 Results Announcement 26
Notestothecombinedfinancialinformation
2
Segmentanalysis
AdjustedoperatingprofitisoneofthekeysegmentalprofitmeasuresusedbyReedElsevierinassessingperformance. Adjustedoperating
profitisdefinedasoperatingprofitbeforetheamortisationandimpairmentofacquiredintangibleassetsandgoodwillandexceptional
restructuringandacquisitionrelatedcosts,andisgrosseduptoexcludetheequityshareoftaxesinjointventures. Adjustedfiguresare
reconciledtothereportedfiguresinnote5.
Revenuecontinuingoperations
2009
m2008
m
2009m
2008m
Businesssegment
Elsevier 1,985 1,700 2,223 2,142
LexisNexis
2,557 1,940 2,864
2,444ReedExhibitions 638 707 715 891
ReedBusinessInformation 891 987 998 1,244
Total 6,071 5,334 6,800 6,721
Geographicalorigin
NorthAmerica 3,228 2,544 3,615 3,206
UnitedKingdom 897 905 1,005 1,140
TheNetherlands 662 594 742 748
RestofEurope 851 893 953 1,125
Restofworld 433 398 485 502
Total 6,071 5,334 6,800 6,721
Geographicalmarket
NorthAmerica 3,310 2,624 3,707 3,306
UnitedKingdom
513 580 575
731
TheNetherlands 243 234 272 295
RestofEurope 1,132 1,136 1,268 1,431
Restofworld 873 760 978 958
Total 6,071 5,334 6,800 6,721
Adjustedoperatingprofitcontinuingoperations
2009
m2008
m
2009m
2008m
Businesssegment
Elsevier
693 568 776
716LexisNexis 665 513 745 646
ReedExhibitions 152 183 170 230
ReedBusinessInformation 89 126 99 159
Subtotal 1,599 1,390 1,790 1,751
Corporatecosts (35) (50) (39) (63)
Unallocatednetpensionfinancingcredit 6 39 7 49
Total 1,570 1,379 1,758 1,737
Geographicalorigin
NorthAmerica 777 618 870 779
UnitedKingdom 257 239 288 301
TheNetherlands 243 206 272 259
RestofEurope 212 237 237 299
Restof
world
81 79 91
99
Total 1,570 1,379 1,758 1,737
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Reed Elsevier 2009 Results Announcement 27
Notestothecombinedfinancialinformation
2 Segmentanalysiscontinued
Operatingprofitcontinuingoperations
2009
m2008
m
2009m
2008m
Businesssegment
Elsevier 563 443 631 558
LexisNexis 337 291 377 367
ReedExhibitions 79 123 88 155
ReedBusinessInformation (163) 55 (183) 69
Subtotal
816 912 913
1,149
Corporatecosts (35) (50) (39) (63)
Unallocatednetpensionfinancingcredit 6 39 7 49
Total 787 901 881 1,135
Geographicalorigin
NorthAmerica 252 334 282 421
UnitedKingdom 183 183 205 231
TheNetherlands 218 179 244 226
RestofEurope 95 151 106 189
Restofworld 39 54 44 68
Total 787 901 881 1,135
Theunallocatednetpensionfinancingcreditof6m/7m(2008:39m/49m)comprisestheexpectedreturnonpensionschemeassetsof
189m/212m(2008:
219m/276m)
less
interest
on
pension
scheme
liabilities
of
183m/205m
(2008:
180m/227m).
Shareofposttaxresultsofjointventuresof15m/17m(2008:18m/23m)includedinoperatingprofitcomprises4m/5m(2008:
4m/5m)relatingtoLexisNexis,10m/11m(2008:14m/18m)relatingtoReedExhibitionsand1m/1m(2008:nil)relatingtoReed
BusinessInformation.
3 Discontinuedoperations
DiscontinuedoperationscomprisetheresultsoftheEducationdivision,thedisposalofwhichwascompletedinJanuary2008withthesaleof
theeducationalassessmentbusiness. ThedisposaloftheUSK12SchoolsEducationandInternationalbusinesseshadcompletedin2007.
Netprofitfromdiscontinuedoperations
2009
m2008
m
2009
m2008
m
Revenue 12 15
Operatingcosts (12) (15)
Operatingprofitandprofitbeforetax
Taxation
Profitaftertaxation
Gainondisposals 67 72
Taxondisposals (49) (62)
Netprofitfromdiscontinuedoperations 18 10
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Reed Elsevier 2009 Results Announcement 28
Notestothecombinedfinancialinformation
3
Discontinuedoperations
continued
Cashflowsfromdiscontinuedoperations
2009
m2008
m
2009m
2008m
Netcashflowfromoperatingactivities 2 3
Netcashflowusedininvestingactivities (50) (36)
Netcashflowfromfinancingactivities
Netmovementincashandcashequivalents (48) (33)
Netcashflowfrominvestingactivitiesfortheyearended31December2008includedcashproceeds,netofexpenses,onthecompleted
disposalsof
270m/367m
and
taxes
paid
on
completed
disposals
of
320m/403m.
4 Combinedstatementofcashflows
Reconciliationofoperatingprofitbeforejointventurestocashgeneratedfromoperationscontinuingoperations
2009
m2008
m
2009m
2008m
Operatingprofitbeforejointventures 772 883 864 1,112
Amortisationofacquiredintangibleassets 364 278 408 350
Impairmentofacquiredintangibleassetsandgoodwill 169 9 189 11
Amortisationof
internally
developed
intangible
assets
139 88 156
111
Depreciationofproperty,plantandequipment 84 79 94 100
Sharebasedremuneration 17 46 19 58
Totalnoncashitems 773 500 866 630
Movementinworkingcapital 59 69 66 88
Cashgeneratedfromoperations 1,604 1,452 1,796 1,830
Reconciliationofnetborrowings
Cash&cash
equivalents
m Borrowings
m
Relatedderivative
financial
instruments
m 2009
m 2008
m
Atstartofyear 375 (6,142) 41 (5,726) (492)
Increase/(decrease)incashandcashequivalents 301 301 (2,174)
Decrease/(increase)inborrowings 950 950 (1,499)
Redemptionofdebtrelatedderivativefinancialinstruments (62)
Changesresultingfromcashflows 301 950 1,251 (3,735)
Borrowingsinacquiredbusiness (219)
Inceptionoffinanceleases (26) (26) (1)
Fairvalueadjustments 7 4 11 2
Exchangetranslationdifferences 58 505 (4) 559 (1,281)
Atendofyear 734 (4,706) 41 (3,931) (5,726)
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Reed Elsevier 2009 Results Announcement 29
Notestothecombinedfinancialinformation
4
Combinedstatement
of
cash
flows
continued
Reconciliationofnetborrowings
Cash&cashequivalents
mBorrowings
m
Relatedderivative
financialinstruments
m2009
m2008
m
Atstartofyear 386 (6,326) 42 (5,898) (669)
Increase/(decrease)incashandcashequivalents 337 337 (2,866)
Decrease/(increase)inborrowings 1,064 1,064 (1,913)
Redemptionof
debt
related
derivative
financial
instruments
(78)
Changesresultingfromcashflows 337 1,064 1,401 (4,857)
Borrowingsinacquiredbusiness (279)
Inceptionoffinanceleases (29) (29) (1)
Fairvalueadjustments 8 4 12 3
Exchangetranslationdifferences 99 13 112 (95)
Atendofyear 822 (5,270) 46 (4,402) (5,898)
Netborrowingscomprisecashandcashequivalents,loancapital,financeleases,promissorynotes,bankandotherloans,andthose
derivativefinancialinstrumentsthatareusedtohedgethefairvalueoffixedrateborrowings.
Borrowingsbyyearofrepayment
2009
m2008
m
2009m
2008m
Within1year 678 448 759 461
Within1to2years 349 1,707 390 1,758
Within2to3years 437 1,885 490 1,942
Within3to4years 640 578 717 595
Within4to5years 779 104 872 107
After5years 1,823 1,420 2,042 1,463
After1year 4,028 5,694 4,511 5,865
Total 4,706 6,142 5,270 6,326
Fixedratetermdebtof$1,500m,600mand300mandfloatingratetermdebtof50m,totalling1,836m/2,056m,wereissuedinthe
yearand
used
to
repay
$2.8bn
of
amounts
outstanding
on
the
ChoicePoint
acquisition
facility.
The
term
debt
was
issued
in
4,
5,
8and
10
yearmaturities.
Shorttermbankloans,overdraftsandcommercialpaperwerebackedupat31December2009bya$2,500m(1,548m/1,734m)
committedbankfacilitymaturinginMay2010,whichwasundrawn,anda$2,000m(1,238m/1,387m)committedbankfacility,forward
startinginMay2010andmaturinginMay2012.InJanuary2010the$2,500mcommittedfacilitymaturinginMay2010wascancelledand
thestartdateofthe$2,000mcommittedfacilitybroughtforwardtostartimmediately.Thisbackupfacilityprovidessecurityoffundingfor
$2,000mofshorttermdebttoMay2012.
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Reed Elsevier 2009 Results Announcement 30
Notestothecombinedfinancialinformation
5
Adjustedfigures
ReedElsevierusesadjustedfiguresaskeyperformancemeasures.Adjustedfiguresarestatedbeforeamortisationandimpairmentof
acquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,disposalgainsandlossesandothernon
operatingitems,relatedtaxeffectsandmovementsindeferredtaxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenear
term.Adjustedoperatingprofitisalsogrosseduptoexcludetheequityshareoftaxesinjointventures.Exceptionalrestructuringcostsrelate
tothemajorrestructuringprogrammesannouncedinFebruary2008and2009. Acquisitionrelatedcostsrelatetoacquisitionintegration
andfeesincurredinconnectionwithacquisitionfinancing.Adjustedoperatingcashflowismeasuredafterdividendsfromjointventuresand
netcapitalexpenditurebutbeforepaymentsinrelationtoexceptionalrestructuringandacquisitionrelatedcosts.Adjustedfiguresare
derivedasfollows:
2009
m2008
m 2009
m2008
m
Operating
profit
continuing
operations 787 901 881
1,135Adjustments:
Amortisationofacquiredintangibleassets 368 281 412 354
Impairmentofacquiredintangibleassetsandgoodwill 177 9 198 11
Exceptionalrestructuringcosts 182 152 204 192
Acquisitionrelatedcosts 48 27 54 34
Reclassificationoftaxinjointventures 8 9 9 11
Adjustedoperatingprofitfromcontinuingoperations 1,570 1,379 1,758 1,737
Profitbeforetaxcontinuingoperations 435 617 487 777
Adjustments:
Amortisationofacquiredintangibleassets 368 281 412 354
Impairmentofacquiredintangibleassetsandgoodwill 177 9 198 11
Exceptionalrestructuringcosts 182 152 204 192
Acquisition
related
costs
48 45 54
57
Reclassificationoftaxinjointventures 8 9 9 11
Disposalsandothernonoperatingitems 61 92 68 116
Adjustedprofitbeforetaxfromcontinuingoperations 1,279 1,205 1,432 1,518
Profitattributabletoparentcompaniesshareholders 391 476 438 587
Netprofitfromdiscontinuedoperations (18) (10)
Profitattributabletoparentcompaniesshareholders
continuingoperations 391
458 438 577
Adjustments(posttax):
Amortisationofacquiredintangibleassets 411 318 460 401
Impairmentofacquiredintangibleassetsandgoodwill 136 9 152 11
Exceptionalrestructuringcosts 133 111 149 140
Acquisition
related
costs
33 31 37
39
Disposalsandothernonoperatingitems (22) 61 (25) 77
Deferredtaxcreditsonacquiredintangibleassetsnotexpectedto
crystalliseinthenearterm (100)
(69)
(112) (86)
Adjustedprofitattributabletoparentcompanies
shareholdersfromcontinuingoperations 982
919 1,099 1,159
Cashgeneratedfromoperations 1,604 1,452 1,796 1,830
Dividendsreceivedfromjointventures 23 23 26 29
Purchasesofproperty,plantandequipment (78) (57) (87) (72)
Proceedsfromdisposalsofproperty,plantandequipment 4 5 4 6
Expenditureoninternallydevelopedintangibleassets (164) (115) (184) (145)
Paymentsrelatingtoexceptionalrestructuringcosts 124 72 139 91
Paymentsrelating
to
acquisition
related
costs
45 27 51
34
Adjustedoperatingcashflowfromcontinuingoperations 1,558 1,407 1,745 1,773
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Reed Elsevier 2009 Results Announcement 31
Notestothecombinedfinancialinformation
5
Adjustedfigures
continued
Totaloperations
2009
m2008
m
2009m
2008m
Profitattributabletoparentcompaniesshareholders
totaloperations 391 476
438 587
Adjustments(posttax):
Amortisationofacquiredintangibleassets 411 318 460 401
Impairmentofacquiredintangibleassetsandgoodwill 136 9 152 11
Exceptionalrestructuringcosts 133 111 149 140
Acquisition
related
costs
33 31 37
39
Disposalsandothernonoperatingitems (22) 43 (25) 67
Deferredtaxcreditsonacquiredintangibleassetsnotexpectedto
crystalliseinthenearterm (100)
(69)
(112) (86)
Adjustedprofitattributabletoparentcompanies
shareholdersfromtotaloperations 982
919 1,099 1,159
6 Pensionschemes
Theamountrecognisedinthebalancesheetinrespectofdefinedbenefitpensionschemesatthestartandendoftheyearandthe
movementsduringtheyearwereasfollows:
2009
m
2008
m
2009
m
2008
m
Atstartofyear (369) 50 (380) 68
Servicecost(includingcurtailmentcredits of43m/48m(2008:nil)) (24) (75) (27) (94)
Interestonpensionschemeliabilities (183) (180) (205) (227)
Expectedreturnonschemeassets 189 219 212 276
Actuarialgain/(loss) 6 (347) 7 (437)
Contributionsbyemployer 101 79 113 100
Acquisitions (9) (11)
Curtailmentondisposalofoperations 3 4
Exchangetranslationdifferences 45 (109) 17 (59)
Atendofyear (235) (369) (263) (380)
Thenetpensionobligationof235m/263mat31December2009comprisesschemesindeficitincludingunfundedschemeswithnet
pensionobligations
of
345m/386m
(2008:
521m/537m)
and
schemes
in
surplus
with
net
pension
assets
of
110m/123m
(2008:
152m/157m).
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Reed Elsevier 2009 Results Announcement 32
Notestothecombinedfinancialinformation
7
Provisions
Theamountrecognisedinthebalancesheetinrespectofprovisionsatthestartandendoftheyearandthemovementsduringtheyear
wereasfollows:
2009
m2008
m
2009m
2008m
Atstartofyear 114 21 117 28
Charged 227 79 254 100
Utilised (134) (9) (150) (11)
Exchangetranslationdifferences (12) 23 (2)
Atendofyear 195 114 219 117
Theamount
as
at
31
December
2009
comprises
property
provisions
of
89m/99m
(2008:
45m/46m),
relating
to
sub
lease
shortfalls
and
guaranteesgiveninrespectofcertainpropertyleases,andrestructuringprovisionsof106m/120m(2008:69m/71m),principally
relatingtoseveranceandoutsourcingmigrationcosts,andtherestructuringandclosureofRBIUScontrolledcirculationtitles.
8 Goodwillandintangibleassets
Carryingvaluesofgoodwillandintangibleassetshavebeenreviewedforindicationsofimpairment.Wheresuchindicationshavebeen
identified,thecarryingvalueoftheassethasbeencomparedwiththeestimatedvalueinuse. Asaresultofthisreviewimpairmentcharges
of142m/159mhavebeenrecordedinRBI,principallyrelatingtotheRBIUSdivision,and35m/39minReedExhibitionsrelatingtoa
numberofminorexhibitions. Thechargesreducegoodwillby110m/123mandacquiredintangibleassetsby67m/75m.
9 ProformaChoicePointfigures
On19September2008ReedElsevieracquiredChoicePoint,Inc.Proformarevenueandadjustedoperatingprofitforthebusinessexpressed
inUSdollarsaresetoutbelowpreparedonthebasisofReedElsevieraccountingpolicies,andasiftheacquisitionofChoicePointtookplace
on1January
2008,
and
they
exclude
the
results
of
businesses
sold,
transaction
related
expenses
and
other
non
recurring
operating
charges.
$ 2009
$m2008
$m
Revenue 917 912
Adjustedoperatingprofit 317 220
10 Exchangetranslationrates
Inpreparingthecombinedfinancialinformationthefollowingexchangerateshavebeenapplied:
Incomestatement Statementoffinancialposition
2009 2008 2009 2008
Euro
to
sterling
1.12 1.26 1.12
1.03USdollarstosterling 1.57 1.85 1.62 1.45
USdollarstoeuro 1.40 1.47 1.44 1.41
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Reed Elsevier 2009 Results Announcement 33
ReedElsevierPLCSummaryfinancialinformation
Basisofpreparation
TheReedElsevierPLCshareoftheReedElseviercombinedresultshasbeencalculatedonthebasisofthe52.9%economicinterestofthe
ReedElsevierPLCshareholdersintheReedElseviercombinedbusinesses,aftertakingaccountoftheresultsarisinginReedElsevierPLCand
itssubsidiaryundertakings.Thesummaryfinancialinformation,presentedincondensedform,hasbeenpreparedonthebasisofthegroup
accountingpoliciesofReedElsevierPLC.TheReedElsevierPLCgroupaccountingpoliciesareinaccordancewithInternationalFinancial
ReportingStandards(IFRS)asadoptedbytheEuropeanUnionandasissuedbytheInternationalAccountingStandardsBoard,andareset
outonpage149oftheReedElsevierAnnualReportsandFinancialStatements2008.IAS1PresentationofFinancialStatements(revised
2007)andamendmentstoIAS23BorrowingCosts,theeffectsofwhicharedescribedonpage25,becameeffectiveandwereadopted
accordinglyintheyear.ReedElsevierPLCs52.9%economicinterestinthenetassetsofthecombinedbusinessesisshowninthestatement
offinancialpositionasinvestmentsinjointventures,netoftheassetsandliabilitiesreportedaspartofReedElsevierPLCanditssubsidiary
undertakings.ThedirectorsofReedElsevierPLC,havingmadeappropriateenquiries,considerthatadequateresourcesexistforthegroupto
continuein
operational
existence
for
the
foreseeable
future
and
that,
therefore