GOOD FINANCIAL PROGRESS AND SHARPENED STRATEGIC FOCUS
Good financial progress
Adjusted Figures
Revenues up 4% to £5,398m/up 5% to €7,935m, up 6% at constant currencies.
Adjusted operating profits, before amortisation of acquired intangible assets and acquisition integration costs, up 6% to £1,210m/up 7% to €1,779m, up 9% at constant currencies.
Adjusted earnings per share, at reported exchange rates, up 7% to 33.6p for Reed Elsevier PLC and up 9% to €0.76 for Reed Elsevier NV, up 11% at constant currencies.
10% growth in online information and digital services which now account for 37% of total revenues.
Adjusted operating margins at 22.4%, up 0.7%pts underlying.
95% of adjusted operating profits converted into cash with free cash flow after interest and taxation up 7% to £817m/up 8% to €1,201m.
£588m/€864m of cash returned to shareholders in 2006 through dividends and share buybacks, representing 72% of free cash flow.
Return on invested capital increased to 9.8% post tax.
Increase in equalised final dividends for Reed Elsevier PLC and Reed Elsevier NV of 10% and 14% respectively giving total dividends for 2006 up 10% to 15.9p and up 13% to €0.406 respectively.
Reported Figures


Reported operating profit, after amortisation of acquired intangible assets and acquisition integration costs, up 5% to £880m/up 6% to €1,294m.
Reported earnings per share up 38% to 25.6p/up 37% to €0.59.
Sharpened strategic focus

Following a detailed review, Reed Elsevier is to sharpen its strategic focus to best capitalise on growing digital opportunities in its key markets of Science and Medical, Legal and Business.
Sale of the Education division is planned; its business dynamics and strategy have increasingly differed from the other three divisions as Elsevier, LexisNexis and Reed Business accelerate their online information and workflow solution strategies.
It is the intention to return the net proceeds to shareholders by way of a special distribution in the equalisation ratio. The sale of Education and return of capital is expected to be modestly dilutive to proforma adjusted earnings per share.
Reed Elsevier's strategic focus across all its businesses will be:
• to deliver authoritative content through leading brands
• to drive online solutions
• to improve cost efficiency
• selective portfolio development.

This strategy, coupled with the disposal of the Education business, will produce a more cohesive and predictable business with an expectation of a minimum 10% annual growth in adjusted earnings per share at constant currencies.
Reed Elsevier's Chief Executive Officer, Sir Crispin Davis, commented:

"2006 saw important progress in the development of Reed Elsevier's business. There is momentum behind our digital revenues driven by a widening range of innovative online information products, increasingly embedded in customer workflows. The planned sale of our Harcourt Education division announced today sharpens our strategic focus and concentrates our resources on the digital opportunities across an increasingly synergistic portfolio.

The 2006 financial results were encouraging, with revenue growth in line with our expectations and improved underlying margins. Strong cash generation and higher returns on invested capital have also been delivered. Recent acquisitions in e-health, legal solutions, risk management and business to business online are accelerating our digital progress and delivering increasing returns.

Going into 2007, market conditions are generally favourable. Our strategy is clear, the business well focused, and we are leveraging our resources to good effect. The digital horizon is expanding and Reed Elsevier is well placed."

Dividend per share 2006 15.9p 2005 14.4p +10% voor Engeland
2006 €0.406 2005 €0.359 +13% voor nederland