REED ELSEVIER 2014 RESULTS

RNS Number : 9062F

Reed Elsevier PLC

26 February 2015

 



Issued on behalf of Reed Elsevier PLC and Reed Elsevier NV

26 February 2015

RESULTS FOR THE YEAR TO DECEMBER 2014

Reed Elsevier, the global professional information company, reports continued underlying growth in revenue, operating profit and earnings in 2014, and announces simplification of corporate structure.

Financial results highlights Ø Underlying revenue growth +3% excluding exhibition cycling; full year total £5,773m/€7,159m Ø Underlying adjusted operating profit growth +5%; full year total £1,739m/€2,156m Ø Adjusted EPS for Reed Elsevier PLC 56.3p (54.0p); Reed Elsevier NV €1.07 (€0.99); +10% constant   currency Ø Reported EPS for Reed Elsevier PLC 43.0p (48.8p); Reed Elsevier NV €0.85 (€0.91) Ø Proposed full year dividend +6% to 26.0p for Reed Elsevier PLC; +16% to €0.589 for Reed Elsevier NV Ø Return on invested capital up 0.7 percentage points to 12.8% Ø Cash conversion rate 96%; leverage 2.3x EBITDA pensions and lease adjusted (1.7x unadjusted) Ø £600m of share buybacks completed in 2014; total of £500m share buybacks planned in 2015

Simplification of corporate structure and increased transparency Ø Simplifying structure by combining all assets below the two parent companies into a new single   group entity and eliminating parent company cross-shareholding Ø Ownership and dividend rights unchanged for all shareholders; cost and profit neutral for company Ø Increasing share price transparency by moving all share listings to equalisation ratio of 1:1 Ø Modernising entity names: RELX Group plc for new single group entity; RELX PLC and RELX NV for    parents Ø New structure and share listings fully implemented from 1 July 2015 subject to shareholder    approvals

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

"Reed Elsevier continued to execute well on its strategic and financial priorities in 2014, and we are recommending a 6% increase in the full year dividend for Reed Elsevier PLC and a 16% increase for Reed Elsevier NV. We are proposing a set of measures at the forthcoming AGMs that will simplify our corporate structure and increase transparency for our shareholders."

Chief Executive Officer, Erik Engstrom, commented:

"In 2014 we maintained good momentum across our key financial metrics of underlying revenue growth, underlying operating profit growth, adjusted earnings per share growth, and return on invested capital. We made further strategic and operational progress as we continued to transform our business, primarily through organic development."

"We are now extending our efforts to modernise and simplify the company to our corporate structure, our share listings, and our corporate entity names. We are announcing a set of changes that represent a significant simplification without impacting the economic interests of our shareholders."

"Business trends in the early part of 2015 remain consistent with 2014 trends across our business, and we are confident that, by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit, and earnings growth in 2015."

FINANCIAL RESULTS HIGHLIGHTS

Reed Elsevier continued to make good progress against its strategic and financial priorities in 2014.

Revenue of £5,773m/€7,159m; underlying growth +3% excluding exhibition cycling: Had exhibition cycling been included underlying revenue growth would have been +4%. The overall underlying growth rate reflects continued growth in electronic and face to face revenues, which accounted for 82% of the total (2013: 81%) growing +5-7%, partially offset by continuing print revenue declines.

Adjusted operating profit of £1,739m/€2,156m; underlying growth +5%: The improvement in profitability reflects a combination of underlying revenue growth, process innovation and portfolio development. Reported operating profit, after amortisation of acquired intangible assets, was up +2% to £1,402m/+7% to €1,738m.

Interest and tax: Adjusted net interest expense was £30m/€27m lower at £147m/€182m reflecting the benefits of term debt refinancings and currency translation effects. The adjusted effective tax rate was unchanged at 23.5%.

Adjusted EPS: Constant currency growth +10%: 56.3p (54.0p) for Reed Elsevier PLC; €1.07 (€0.99) for Reed Elsevier NV.

Reported EPS: Reported EPS was 43.0p (48.8p) for Reed Elsevier PLC and €0.85 (€0.91) for Reed Elsevier NV, reflecting the absence in 2014 of a non-recurring deferred tax credit recognised in the prior year.

Proposed full year dividend: +6% to 26.0p for Reed Elsevier PLC; +16% to €0.589 for Reed Elsevier NV. The proposed average full year dividend growth rate is broadly in line with adjusted EPS growth at constant currency rates. The Reed Elsevier PLC and Reed Elsevier NV full year dividends are covered 2.2x and 1.8x by adjusted EPS respectively.

Net debt/EBITDA 2.3x on a pensions and lease adjusted basis (unadjusted 1.7x): Net debt was £3.5bn/€4.6bn on 31 December 2014. The adjusted cash flow conversion rate was 96%.

Organic development: In 2014 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. Capital expenditure as a percentage of revenues remained at 5%.

Portfolio development: In 2014 we completed 27 small acquisitions of content, data and exhibition assets for a total consideration of £385m. We also completed the disposal of 17 assets for a total consideration of £74m.

Share buybacks: In 2014 we deployed £600m on share buybacks. In 2015, we intend to deploy a total of £500m on share buybacks, based on our strong balance sheet and cash flow. Both amounts exclude annual employee share plan purchases of around £35m. £100m of this year's total has already been completed, leaving a further £400m to be deployed by the end of the year.

FULL YEAR 2015 OUTLOOK

Business trends in the early part of 2015 remain consistent with 2014 trends across our business, and we are confident that, by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit, and earnings growth in 2015.

Corporate structure, equalisation arrangements and corporate entity names

We are extending our efforts to modernise and simplify the company to our corporate structure, our share listings, and our corporate entity names. We believe that the set of measures that we are proposing will simplify our structure, help clarify the economic interests of parent company shareholders, and increase share price transparency.

This set of changes will be cost and profit neutral for the company, before and after tax. None of these changes impact the economic interests of any shareholder, and in particular, ownership, dividend and capital distribution rights are unaffected.

Ownership of all Reed Elsevier businesses, subsidiaries and financing activities below the two listed parent companies, Reed Elsevier PLC and Reed Elsevier NV, has been transferred to one new single group entity, effective 25 February 2015.

From 1 July 2015, we propose to further simplify the corporate structure by eliminating the cross-shareholding between the two parent companies, and aligning their direct equity holdings in the new single group entity with their external shareholders' respective economic interests of 52.9% and 47.1%.

We also propose to increase share price transparency by moving the share equalisation ratio between Reed Elsevier PLC and Reed Elsevier NV to 1:1, and to adjust the multiples on their ADRs so that they each represent one Reed Elsevier PLC or one Reed Elsevier NV share (from current 4 to 1 and 2 to 1 multiples) respectively.

We have named the newly formed single group entity RELX Group plc. We believe that this shorter and more modern name reflects the transformation of the company to a technology, content and analytics driven business while maintaining the link with its proud heritage. There will not be any brand or name changes for any customer facing products or business units.

We propose to align the two parent company names with RELX Group plc. The proposed new names are RELX PLC for the London listed shareholding vehicle and RELX NV for the Amsterdam listed shareholding vehicle, effective 1 July 2015.

Details of the measures have been set out in an attachment (page 42) to this press release.

Reed Elsevier FINANCIAL SUMMARY

		£				€
	Year ended 31 December				Year ended 31 December
	2014 £m	2013 £m	Change		2014 €m	2013 €m	Change		Underlying growth rates
Revenue	5,773	6,035	-4%		7,159	7,121	+1%		+3%*
Adjusted operating profit	1,739	1,749	-1%		2,156	2,064	+4%		+5%
Adjusted operating margin	30.1%	29.0%			30.1%	29.0%
Reported operating profit	1,402	1,376	+2%		1,738	1,624	+7%
Adjusted net interest expense	(147)	(177)			(182)	(209)
Adjusted profit before tax	1,592	1,572	+1%		1,974	1,855	+6%
Adjusted tax	(374)	(370)			(464)	(436)
Non-controlling interests	(5)	(5)			(6)	(6)
Adjusted net profit	1,213	1,197	+1%		1,504	1,413	+6%
Reported net profit	955	1,110			1,184	1,310
Reported net margin	16.5%	18.4%			16.5%	18.4%
Net borrowings	3,550	3,072			4,579	3,686

*Excluding exhibition cycling. Had exhibition cycling been included underlying revenue growth would have been +4%.

PARENT COMPANIES

	Reed Elsevier PLC				Reed Elsevier NV
	Year ended 31 December				Year ended 31 December
	2014	2013	Change		2014	2013	Change		Change at constant currencies
Adjusted earnings per share	56.3p	54.0p	+4%		€1.07	€0.99	+8%		+10%
Reported earnings per share	43.0p	48.8p	-12%		€0.85	€0.91	-7%
Ordinary dividend per share	26.0p	24.6p	+6%		€0.589	€0.506	+16%

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 27. The reported operating profit figures are set out in note 2 on page 25. 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. Underlying revenue growth rates also exclude the effects of exhibition cycling. Constant currency growth rates are based on 2013 full year average and hedge exchange rates.

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", "trends" 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.

Notes for Editors

RELX Group plc is a world leading provider of information solutions for professional customers across industries. The group employs 28,500 people of whom about half are in North America.

Reed Elsevier PLC is the London Stock Exchange listed vehicle for holding shares in RELX Group. Shareholders in Reed Elsevier PLC own a 52.9% economic interest in RELX Group. Reed Elsevier NV is the Amsterdam Stock Exchange listed vehicle for holding shares in RELX Group. External shareholders in Reed Elsevier NV own a 47.1% economic interest in RELX Group. The combined market capitalisation of the two parent companies is approximately £24bn/€33bn. The 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 Annual Reports and Financial Statements 2014 will be available on the RELX Group website at www.RELXgroup.com from 10 March 2015. Copies of the Annual Reports and Financial Statements 2014 are expected to be posted to shareholders in Reed Elsevier PLC on 23 March 2015, and will be available to shareholders in Reed Elsevier NV on request. Copies of the 2014 Results Announcement are available to the public on the RELX Group website and from the respective companies:

RELX Group plc 1-3 Strand London WC2N 5JR United Kingdom

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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