Professional information businesses relatively robust; advertising and promotion markets significantly impacted by global recession; tight control of cost base
Revenues up 3% and adjusted operating profits up 5% at constant currencies.
Adjusted operating margin up 40 basis points; restructuring programme on track to deliver $350m annual costs savings by 2011.
Adjusted earnings per share +21% to 24.5p for Reed Elsevier PLC and +5% to €0.42 for Reed Elsevier NV.
Strong cash flow with 92% of adjusted operating profit converted into cash.
Significant currency translation benefits, especially in sterling results.
Good progress at Elsevier (39% of adjusted operating profits).
LexisNexis (42% of adjusted operating profits) sees significant expansion of Risk business with addition of ChoicePoint; insurance business delivering well and integration benefits on track.
LexisNexis law firm markets relatively robust, other than in US legal directory listings; government, corporate and academic markets lower.
Reed Exhibitions (RX) and Reed Business Information (RBI) (together 20% of adjusted operating profits) impacted as customers cut back on marketing and advertising; RX also impacted by major biennial shows cycling out; RBI US controlled circulation magazines to be divested.
Reported earnings per share decline: reflecting higher restructuring costs, RBI US impairment charge and lower post tax disposal gains.
More aggressive market and product strategies to drive organic revenue development
Deeper insight and integration with customers.
Leverage content with information, data, tools and analytics.
Expand technology base; upgrade skills and competencies.
Step up investment in marketing, product engineering, infrastructure and sales.
Deliver higher customer ROI and increased competitive differentiation.
Equity placing to strengthen balance sheet
Equity placing of up to 9.9% of issued share capital.
Credit metrics too stretched, post acquisition of ChoicePoint and non-sale of RBI, given current economic environment and later cycle nature of Reed Elsevier’s business.
Appropriately resourced to support market and product strategies.
Outlook remains challenging
Overall well placed in continuing tough environment.
Professional markets more resilient than most but not totally immune from cyclical pressures.
Advertising and promotion markets continue to be impacted by recession.
Constant currency adjusted results expected to be under some pressure for full year and going into next, though current exchange rates, if they prevail, should ensure positive progression for the parent companies in 2009 particularly in sterling.
Commenting on today’s results, Anthony Habgood, Chairman of Reed Elsevier, said:
“This robust set of first half results demonstrates the quality of the majority of our business in tough economic conditions. Our priorities are to manage through this environment whilst developing strategies to emerge from this recession stronger and with greater focus on growing products and markets. Last year’s acquisition of ChoicePoint and the terminated sale of RBI have given us more debt than is prudent in current economic conditions. The equity raising announced today will address our stretched credit metrics and position the balance sheet to support the business through its continuing evolution.”
Reed Elsevier’s Chief Executive Officer, Ian Smith, commented:
“The downturn in macro-economic conditions over the last year has been severe and unprecedented. The biggest impact on our business is concentrated in advertising and promotion markets, including pharma promotion in our medical business, law firm directory listings in our legal business, and most particularly in business to business markets. The depth and length of the downturn is however having some effect on even our most resilient businesses. Our focus is on supporting our customers with the information and solutions they need to succeed in this environment while tightly managing our cost base. The strengthening of the balance sheet will ensure that we are appropriately resourced to do so.
Our markets have good attractive long term growth prospects. We have strong positions in these markets, and technology is enabling us to introduce new products and services to help customers increase their effectiveness and make them more successful. I am convinced that there is a bigger prize for our customers, employees and our shareholders by accelerating investment and stepping up our organic growth development. Despite the global recession, I believe that now is the right time to develop more aggressive market and product strategies to capture the market opportunities and increase competitive differentiation."
