REED ELSEVIER 2013 RESULTS

RNS Number : 0423B

Reed Elsevier PLC

27 February 2014

 



Issued on behalf of Reed Elsevier PLC and Reed Elsevier NV

27 February 2014

RESULTS FOR THE YEAR TO DECEMBER 2013

Reed Elsevier, the global professional information company, reports continued underlying growth in revenue, operating profit and earnings in 2013.

Financial highlights Ø Underlying revenue growth +2% (+3% excluding biennial exhibition cycling) to £6,035m/€7,121m Ø Underlying adjusted operating profit growth +5% to £1,749m/€2,064m Ø Adjusted EPS +9% to 54.0p for Reed Elsevier PLC; +5% to €0.99 for Reed Elsevier NV; +7% constant currency Ø Full year dividend +7% to 24.60p for Reed Elsevier PLC; +8% to €0.506 for Reed Elsevier NV Ø Reported EPS +9% to 48.8p for Reed Elsevier PLC; +5% to €0.91 for Reed Elsevier NV Ø Return on invested capital up 0.4 percentage points to 12.1% Ø Cash conversion rate 97%; leverage 2.1x net debt/ EBITDA pensions and lease adjusted (1.6x unadjusted)

Operational and strategic highlights Ø Continued underlying revenue and profit growth across all five major business areas Ø Improved profitability driven by process innovation and portfolio development Ø Improved business profile: electronic & face-to-face 81% (2012: 79%); growing at +5% to +7% underlying Ø Significant portfolio reshaping, primarily in H1 Ø New technology build out across business platforms progressing well Ø £600m of share buybacks completed in 2013; total of £600m share buybacks planned in 2014

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

"Reed Elsevier is continuing to deliver on its long term strategic and financial priorities. With underlying revenue growth across all major business areas, operating profit and earnings grew well in 2013. We made good progress on organic development and portfolio reshaping, and our strong cash flow enabled us to step up our share buyback programme whilst maintaining balance sheet strength. We are recommending a +7% increase in the full year dividend for Reed Elsevier PLC and +8% for Reed Elsevier NV, in line with growth in adjusted earnings per share at constant exchange rates."

Chief Executive Officer, Erik Engstrom, commented:

"In 2013 we remained focused on transforming our business profile and improving the quality of our earnings. We did this primarily through organic investment, supported by a small number of targeted acquisitions, and by exiting from several businesses that no longer fit our strategy."

"We continued to take a pragmatic approach to ensuring that the value compounding within the business translates into shareholder value, and as part of this we increased our share buyback programme to £600m in 2013. In 2014 we again intend to deploy a total of £600m on share buybacks, reflecting our strong balance sheet and cash flow."

"Early trends across our business in 2014 remain broadly consistent with 2013, and we are confident that, by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit, and earnings growth".

REED ELSEVIER FINANCIAL AND OPERATIONAL HIGHLIGHTS

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

Revenue of £6,035m/€7,121m; underlying growth +2% (+3% excluding biennial exhibition cycling): The overall underlying growth rate of +3% reflects +5 to +7% growth in electronic and face-to-face revenues, which now account for 81% of the total (2012: 79%), partially offset by continuing print revenue declines.

Adjusted operating profit £1,749m/€2,064m; underlying growth +5%: Underlying operating profit growth across Reed Elsevier reflects a combination of process innovation and portfolio development. Reported operating profit, after amortisation of acquired intangible assets, was up +3% to £1,376m/down -1% to €1,624m.

Return on invested capital 12.1%, up by 0.4%pts on 2012: The ROIC increase was driven by the increase in adjusted operating profit.

Interest and tax: Adjusted net interest expense was £39m lower at £177m (€56m lower at €209m) reflecting the benefits of term debt refinancing initiatives over the last 18 months. The adjusted effective tax rate was unchanged at 23.5%.

Adjusted EPS up +9% to 54.0p for Reed Elsevier PLC; up +5% to €0.99 for Reed Elsevier NV; constant currency growth +7%: Reported EPS growth was +9% to 48.8p for Reed Elsevier PLC, +5% to €0.91 for Reed Elsevier NV.

Equalised full year dividend up +7% to 24.60p for Reed Elsevier PLC; up +8% to €0.506 for Reed Elsevier NV: The proposed average full year dividend growth rate is in line with adjusted EPS growth at constant currency rates. The proposed final dividend for Reed Elsevier PLC is up +6% to 17.95p following an +11% increase in the interim dividend.  The proposed final dividend for Reed Elsevier NV is up +11% to €0.374, following a +2% increase in the interim dividend. The difference in interim and final dividend growth rates reflects exchange rate movements between the declaration dates. The Reed Elsevier PLC and Reed Elsevier NV full year dividends are covered 2.2x and 2.0x by adjusted EPS respectively.

Net debt / EBITDA 2.1x on a pensions and lease adjusted basis (unadjusted 1.6x): Net debt was £3.1bn/€3.7bn on 31 December 2013. Capital expenditure remained at 5% of revenues. The adjusted operating cash flow conversion rate was 97%.

Organic development: In 2013 we continued to develop our global technology platforms across the business, launch new products and services in both existing and adjacent market segments, and extend our reach in high growth markets and geographies.

Acquisitions & disposals: In 2013 we completed 20 small acquisitions of content and data assets across all market segments for a total consideration of £230m. We also completed the disposal of 26 assets that no longer fit our strategy, for a total consideration of £331m.

Share buybacks: In 2013 we deployed £600m on share buybacks. In 2014, although we currently expect disposal proceeds to be lower, we again intend to deploy a total of £600m on share buybacks, based on our strong balance sheet and cash flow. £100m of this year's total has already been completed.

2014 OUTLOOK

Early trends across our business in 2014 remain broadly consistent with full year 2013, with some small variations by market and geography. We are confident that, by continuing to execute on our strategy of delivering improved outcomes to our professional customers, primarily through organic investment, we will deliver another year of underlying revenue, profit, and earnings growth in 2014.

Reed Elsevier FINANCIAL SUMMARY

		£				€
	Year ended 31 December__________				Year ended 31 December
	2013 £m	2012† £m	Change		2013 €m	2012† €m	Change		Underlying growth rates
Revenue	6,035	6,116	-1%		7,121	7,523	-5%		+2%/+3%*
Adjusted operating profit	1,749	1,688	+4%		2,064	2,076	-1%		+5%
Adjusted operating margin	29.0%	27.6%			29.0%	27.6%
Adjusted net interest expense	(177)	(216)			(209)	(265)
Adjusted profit before tax	1,572	1,472	+7%		1,855	1,811	+2%
Tax	(370)	(346)			(436)	(426)
Minority interests	(5)	(5)			(6)	(6)
Adjusted net profit	1,197	1,121	+7%		1,413	1,379	+2%
Reported net profit	1,110	1,044			1,310	1,284
Net borrowings	3,072	3,127			3,686	3,846

*    Excluding biennial exhibition cycling

PARENT COMPANIES

	Reed Elsevier PLC				Reed Elsevier NV
	Year ended 31 December_________				Year ended 31 December
	2013 pence	2012† pence	Change		2013 €	2012† €	Change		Change at constant currencies
Adjusted earnings per share	54.0p	49.4p	+9%		€0.99	€0.94	+5%		+7%
Reported earnings per share	48.8p	44.8p	+9%		€0.91	€0.87	+5%
Ordinary dividend per share	24.6p	23.0p	+7%		€0.506	€0.467	+8%

Adjusted and underlying figures are additional performance measures used by management. Reconciliations between the reported and adjusted figures are set out in note 4 to the combined financial information on page 28. The reported operating profit figures are set out in note 2 on page 25. Unless otherwise indicated, all percentage movements in the following commentary refer to performance at constant exchange rates. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals made in both the year and prior year and assets held for sale. Constant currency growth rates are based on 2012 full year average and hedge exchange rates.

†    Comparative financial information has been restated following the adoption of IAS19 Employee Benefits (revised), see note 1 to the combined financial information on page 23.

ENQUIRIES:

Colin Tennant (Investors) [phone]

Paul Abrahams (Media) [phone]

FORWARD-LOOKING STATEMENTS

This Results Announcement 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 "outlook", "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.

Reed Elsevier Group plc is a world leading provider of professional information solutions. The group employs more than 28,000 people, including almost 14,000 in North America. Reed Elsevier Group plc is owned equally by two parent companies, Reed Elsevier PLC and Reed Elsevier NV; the combined market capitalisation of the two parent companies is approximately £19bn/€24bn. Their shares are traded on the London, Amsterdam and New York Stock Exchanges using the following ticker symbols: London: REL; Amsterdam: REN; New York: RUK and ENL.

The Reed Elsevier Annual Reports and Financial Statements 2013 will be available on the Reed Elsevier website at www.reedelsevier.com from 11 March 2014. Copies of the Annual Reports and Financial Statements 2013 are expected to be posted to shareholders in Reed Elsevier PLC on 24 March 2014, and will be available to shareholders in Reed Elsevier NV on request. Copies of the 2013 Results Announcement are available to the public on the Reed Elsevier website and from the respective companies:

Reed Elsevier PLC 1-3 Strand London WC2N 5JR United Kingdom

Reed Elsevier NV Radarweg 29 1043 NX Amsterdam The Netherlands

For more information, visit www.reedelsevier.com

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