Reed Elsevier Interim Results 2012 Erik Engstrom, CEO Mark Armour, CFO Forward looking statements 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 a number of risks and uncertainties that could cause actual results or outcomes to differ materially from those currently being anticipated. The terms “estimate”, “project”, “plan”, “intend”, “expect”, “should be”, “will be”, “believe” and similar expressions identify forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but are not limited to competitive factors in the industries in which Reed Elsevier operates; demand for Reed Elsevier’s products and services; exchange rate fluctuations; general economic and business conditions; legislative, fiscal, tax and regulatory developments and political risks; the availability of third party content and data; breaches of our data security systems and interruptions in our information technology systems; changes in law and legal interpretations affecting Reed Elsevier’s intellectual property rights and other risks referenced from time to time in the filings of Reed Elsevier with the US Securities and Exchange Commission. 2 1
Mark Armour, CFO 3 2012 H1 financial highlights Improved operating performance • ― Underlying revenue +5% (+3% excluding exhibition cycling) ― Underlying adjusted operating profit +7% Overall revenue growth: constant currencies +5%; sterling +5%; euro +12% • Adjusted operating margin +1.1%pts to 27.7% • Adjusted eps growth: • ― Reed Elsevier PLC +11% to 24.7p ― Reed Elsevier NV +18% to €0.47 Reported eps growth: • ― Reed Elsevier PLC +52% to 24.0p ― Reed Elsevier NV +57% to €0.47 4 2
2012 H1 financial highlights • Strong cash flow conversion: 92% (94% last 12 months) • Good financial position ― Net debt/adjusted ebitda 2.3x (pension and lease adjusted) • Interim dividends: ― Reed Elsevier PLC +6% to 6.0p ― Reed Elsevier NV +18% to €0.130 5 Adjusted profit and loss % change 2012 2011 constant 6 months to 30 June £m £m % change currency Revenue 3,053 2,904 +5% +5% Adjusted operating profit 845 774 +9% +8% Net interest expense (107) (112) Adjusted profit before tax 738 662 +11% +11% Tax (175) (154) Tax rate % 23.7% 23.3% Minority interests (2) (2) Adjusted net profit 561 506 +11% +10% Adjusted figures are stated before amortisation of acquired intangible assets, acquisition related costs, disposal gains / losses and anomalous tax effects 6 3
Adjusted profit and loss 2012 2011 % change % change 6 months to 30 June £m £m % change constant underlying +5% +5% Revenue 3,053 2,904 +5% Adjusted operating profit 845 774 +9% +8% +7% Adjusted operating margin 27.7% 26.6% +1.1%pts +1.0%pts +0.6%pts Underlying revenue +3% excluding exhibition cycling • Underlying revenue and profit growth in each business • Margin improvement includes impact of portfolio changes (+0.4%pts) and net currency • benefits (+0.1%pts) Continued gains in operational efficiency, while investing in new product, sales & marketing, • and improved geographic balance Underlying change fully excludes results of all acquisitions and disposals made both in year and prior year and assets held for sale 7 Revenue 2012 2011 % change % change 6 months to 30 June £m £m constant underlying Elsevier 978 961 +2% +2% LexisNexis Risk Solutions 462 452 0% +5% LexisNexis Legal & Professional 780 779 -1% +1% Reed Exhibitions 486 368 +33% +23% Reed Business Information 347 344 +2% +1% Reed Elsevier 3,053 2,904 +5% +5% 8 4
Adjusted operating profit 2012 2011 % change % change 6 months to 30 June £m £m constant underlying Elsevier 352 343 +2% +4% LexisNexis Risk Solutions 191 178 +5% +5% LexisNexis Legal & Professional 100 94 +7% +2% Reed Exhibitions 151 113 +34% +30% Reed Business Information 63 53 +19% +10% Corporate costs (25) (24) Net pension financing credit 13 17 Reed Elsevier 845 774 +8% +7% 9 Change in underlying revenue, cost, profit Adjusted Adjusted operating operating 6 months to 30 June 2012 Revenue cost profit Elsevier +2% +2% +4% LexisNexis Risk Solutions +5% +5% +5% LexisNexis Legal & Professional +1% +1% +2% Reed Exhibitions +23% +20% +30% RBI +1% -1% +10% Reed Elsevier – underlying +5% +4% +7% Reed Elsevier – total +5% +3% +8% Total at constant currencies 10 5
Adjusted earnings per share 6 months to 30 June 2012 2011 % 2012 2011 % Adjusted net profit: Reed Elsevier £561m £506m +11% €685m €582m +18% PLC (52.9%) £297m £268m +11% NV (50.0%) €343m €291m +18% Average number of shares: PLC (m) 1,203.7 1,201.5 0% NV (m) 735.7 735.1 0% Adjusted earnings per share: PLC 24.7p 22.3p +11% NV €0.47 €0.40 +18% 11 Reported profit before tax 2012 2011 6 months to 30 June £m £m % change Adjusted profit before tax 738 662 +11% Adjustments Amortisation of acquired intangible assets (166) (170) Acquisition related costs (8) (18) Reclassification of tax in joint ventures (1) (7) Disposals and other non-operating items 103 9 Reported profit before tax 666 476 +40% 12 6
Adjusted operating cash flow 2012 2011 6 months to 30 June £m £m Adjusted operating profit 845 774 Capital expenditure (150) (154) Depreciation 113 95 (37) (59) Working capital and other items (30) (23) Adjusted operating cash flow 778 692 Cash flow conversion rate 92% 89% Capex 5% of H1 revenue; 6% expected for full year • Cash conversion rate 94% (2011: 93%) LTM • 13 Free cash flow 2012 2011 6 months to 30 June £m £m % change Adjusted operating cash flow 778 692 +12% Interest paid (100) (102) Tax paid (126) (104) Free cash flow before exceptional spend 552 486 Restructuring / acquisition integration* (32) (46) Free cash flow before dividends 520 440 +18% Ordinary dividends (prior year final) (377) (363) Free cash flow post dividends 143 77 Free cash flow post dividends seasonally weighted to second half • *Net of cash tax relief / repayments 14 7
Balance sheet 30 June 2012 31 Dec 2011 £m £m Goodwill & intangible assets 8,201 8,223 Tangible fixed assets 266 288 Investments & net assets held for sale 222 215 Net pension obligations (396) (242) Working capital (1,049) (1,060) Capital employed 7,244 7,424 Shareholders’ equity 2,242 2,172 Net debt 3,318 3,433 Current & deferred tax (net) 1,603 1,701 Other net liabilities / minorities 81 118 7,244 7,424 15 Movement in net debt £m $m Net debt at 31 December 2011 (3,433) (5,325) Free cash flow post dividends 143 225 Acquisitions / disposals (174) (275) – Acquisitions* – Disposals* 124 196 (50) (79) Net proceeds from share options exercised / other (7) (11) Currency translation 29 (13) Net debt at 30 June 2012 (3,318) (5,203) Net debt / LTM ebitda 2.3x (pensions and lease adjusted) (Dec 2011: 2.3x) • ― 1.7x unadjusted basis (December 2011: 1.8x) *Net of cash tax payments / reliefs 16 8
Use of divestment proceeds Gross proceeds of 2012 divestments to be used to buy back shares • – Mitigating eps dilution from disposals Gross cash proceeds of £158m/€193m to 30 June 2012 • On market purchases of Reed Elsevier PLC and Reed Elsevier NV shares • Ratio of purchases set by reference to equalisation ratio and issued share capitals • 17 Impact of IAS 19 (revised) – effective 1 January 2013 IAS 19 – Employee Benefits (revised) effective 1 January 2013 • Principal change relates to the net pension financing credit / charge • – Return on assets to be calculated by reference to high quality corporate bond discount rate (i.e. same rate as used for discounting liabilities) – To be included in net finance costs and excluded from adjusted earnings measures Balance sheet and cash flows unaffected • H1 2012 pro forma impact would be £13m / €16m reduction in adjusted • profit before tax Restatement of comparatives in 2013 reporting • 18 9
Dividends Reed Elsevier Reed Elsevier PLC NV 2012 2011 % change 2012 2011 % change Interim dividend 6.0p 5.65p +6% €0.130 €0.110 +18% LTM dividend cover 2.2x 2.2x 2.0x 1.9x Difference in dividend growth rates reflects changes in the euro:sterling exchange rate since • prior year dividend announcement date ― Interim: 2012 €1.27:£1 v 2011 €1.14:£1 2011 final dividend equalisation was at €1.20:£1 exchange rate (February 2012) • 19 This slide is intentionally left blank 20 10
Erik Engstrom, CEO 21 Reed Elsevier H1 2012 progress Improving performance in difficult macroeconomic environment • – Underlying revenue and profit growth in all five business areas Continuing transformation of asset base and earnings quality • – Organic development of digital platforms and new products – Portfolio evolution towards higher underlying growth and profitability 22 11
Good H1 underlying revenue growth as reported, including biennial exhibition cycling +5% +1% +1% 2009 2010 2011 2012 H1 H1 H1 H1 -7% 23 Good H1 underlying revenue growth excluding biennial exhibition cycling +3% +3% 2009 2010 2011 2012 H1 H1 H1 H1 -1% -6% 24 12
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