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Reed Elsevier PLC (REL)

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Thursday 31 July, 2008

Reed Elsevier PLC

REED ELSEVIER 2008 INTERIM RE

RNS Number : 2728A
Reed Elsevier PLC
31 July 2008
 



Issued on behalf of Reed Elsevier PLC and Reed Elsevier NV

31 July 2008


REED ELSEVIER 2008 INTERIM RESULTS


HIGHLIGHTS


 

Ø            Strong business momentum and financial performance
Ø            Restructuring programme on track to deliver further margin improvement
Ø            Sale of Harcourt Education fully completed; net proceeds of £2.0bn/€2.7bn returned to shareholders
Ø            Divestment of Reed Business Information in progress
Ø            Agreed £2.1bn/€2.7bn acquisition of ChoicePoint, Inc. expected to close in H2


 

Reed Elsevier's Chief Executive Officer, Sir Crispin Davis, commented:


'We have seen a strong performance across our businesses in the first half despite a more challenging economic backdrop and we remain on track to deliver on our goals this year of good revenue growth, meaningful margin improvement and accelerated earnings growth.


We have made good progress in implementing our plans announced in February to accelerate growth: the planned divestment of Reed Business Information is progressing and we are seeing strong buyer interest in the business; the agreed £2.1bn/€2.7bn acquisition of ChoicePoint, Inc. in the fast growing risk information and analytics markets is moving through US regulatory review and is expected to complete in the second half; our major restructuring programme to deliver £245m/€310m of cost savings over the next four years is on track with the initial targeted £15m/€19m of savings to be delivered this year.  


Whilst the professional markets we serve are not immune to economic cycle effects, they are more resilient than most. This, together with the changes we are making in the business and the growing demand for our online information and workflow solutions with the customer productivity they provide, gives us confidence in the outlook.'


GOOD BUSINESS MOMENTUM AND FINANCIAL PERFORMANCE

Adjusted Figures

Continuing Operations (Elsevier, LexisNexis, Reed Exhibitions)

  • Underlying revenue growth +6%, driven by strong growth in online information and workflow solutions; total revenues of £1,970m/€2,541m, up 10%/down 4% respectively in sterling and euros, and up 5% at constant currencies.

  • Adjusted operating margin +180 basis points (underlying +140 basis points), from good revenue growth and ongoing cost initiatives.

  • Underlying adjusted operating profit growth +11%, before amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs; total adjusted operating profits of £557m/€718m, up 17% and 2% respectively in sterling and euros, and up 12% at constant currencies.

  • Strong cash flow with 94% of adjusted operating profits converted into cash.

  • Movements in average first half exchange rates against the prior first half favourably affect growth rates on translation of results expressed in sterling and adversely affect growth rates expressed in euros.


Total Operations (including Harcourt Education, Reed Business Information)

  • Adjusted earnings per share +35% at constant currencies; at reported rates up 42% to 20.3p for Reed Elsevier PLC and up 25% to €0.40 for Reed Elsevier NV.

  • First half adjusted earnings per share benefit from the effects of Harcourt Education sale: no seasonal first half losses in 2008 and impact of 13.4% share consolidation on return of net proceeds to shareholders.  Positive effect largely reverses in second half when the full year profits of Harcourt Education would have been reported.  

  • Reed Elsevier PLC interim dividend up 18% to 5.3p; equalised Reed Elsevier NV interim dividend unchanged at €0.114 (difference in growth rates reflects movement in euro:sterling exchange rate since last interim declaration date).


Reported Figures

  • Reported operating profits for the continuing businesses, after amortisation of acquired intangibles and exceptional restructuring and acquisition integration costs, increased by 8% to £401m/down 6% to €517m.

  • Reported earnings per share, including discontinued operations and disposal gains, up 13% to 14.1p/down 7% to €0.28.  

     


    Reed Elsevier combined businesses
     
    £
     
     
     
     
     
    %
    Six months ended 30 June
     
    Six months ended 30 June
     
     
    Continuing operations
    2008
    £m
    2007
    £m
    Change
    %
     
    2008
     €m
    2007
    €m
    Change
    %
     
    Change at
    constant
    currencies
    Revenue
    1,970
    1,790
    +10%
     
    2,541
    2,649
    -4%
     
    +5%
    Reported operating profit
    401
    371
    +8%
     
    517
    549
    -6%
     
    +3%
    Adjusted operating profit
    557
    475
    +17%
     
    718
    703
    +2%
     
    +12%
    Adjusted operating margin
    28.3%
    26.5%
    +1.8pts
     
    28.3%
    26.5%
    +1.8pts
     
     
    Adjusted operating cash flow
    523
    426
    +23%
     
    675
    630
    +7%
     
    +16%
    Parent companies
     
    Reed Elsevier PLC
     
    Reed Elsevier NV
     
    Change at
    constant
    currencies
    %
     
    Six months ended 30 June
     
    Six months ended 30 June
     
    Continuing and discontinued operations
    2008
    2007
    Change
    %
     
    2008
    2007
    Change
    %
     
    Reported earnings per share
    14.1p
    12.5p
    +13%
     
    €0.28
    €0.30
    -7%
     
     
    Adjusted earnings per share
    20.3p
    14.3p
    +42%
     
    €0.40
    €0.32
    +25%
     
    +35%
    Dividend per share
    5.3p
    4.5p
    +18%
     
    €0.114
    €0.114
     
     
     
     
     
     
     
     
     
     
     
     

     

     

The results of the Reed Business Information and Harcourt Education divisions are presented as discontinued operations and are excluded from revenue, reported and adjusted operating profit, adjusted operating margin and adjusted operating cash flow.


Adjusted figures are presented as additional performance measures and are stated before amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, and, in respect of earnings, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term. Profit and loss on disposals and other non operating items are also excluded from the adjusted figures. Adjustments made to reported operating profit from continuing operations are amortisation of acquired intangible assets (£105m/135m; 2007 £95m/141m), exceptional restructuring and acquisition integration costs (£45m/€58m; 2007 £5m/7m) and reclassification of tax in joint ventures (£6m/€8m; 2007 £4m/€6m). Reconciliations between the reported and adjusted figures are provided in note 6 to the combined financial information and note 1 to the summary financial information of the respective parent companies.



ENQUIRIES:

Sybella Stanley (Investors)

+44 20 7166 5630

Patrick Kerr (Media)

+44 20 7166 5646


 

 

GOOD PROGRESS AGAINST PLAN TO ACCELERATE GROWTH


        Sale of Harcourt Education completed and return of net proceeds to shareholders


  • Sale of Harcourt Assessment business closed in January 2008, completing divestment of Harcourt Education division.

  • £2.0bn/€2.7bn net proceeds distributed to shareholders on 18 January 2008, accompanied by consolidation of share capital.

  • Significant step for Reed Elsevier towards more consistent, cohesive and synergistic business; return to shareholders of net proceeds maintains capital efficiency.

Divestment of Reed Business Information in progress


  • Preparatory phase completed: vendor due diligence reports prepared; staple financing package to be made available to buyers arranged; Information Memorandum sent to potential bidders.

  • Strong interest from potential buyers; targeted completion of divestment in the second half.

  • Divestment of RBI is a further major step in Reed Elsevier's portfolio development reducing exposure to advertising revenues which fit less well with the subscription-based information and workflow solutions focus of Reed Elsevier's strategy.


Agreed £2.1bn/€2.7bn acquisition of ChoicePoint, Inc. expected to close in H2

  • Announced agreement in February 2008; transaction approved by ChoicePoint shareholders in April; regulatory review in process; expected to complete in second half.

  • First half results announced by ChoicePoint on 24 July - on expectations: Insurance business (85% of H1 continuing operating income) performing strongly (H1 underlying revenue growth of 11%); Screening & Authentication business (14% of continuing operating income) stabilising. 

  • Integration planning well advanced; cost synergy expectations on track.

  • Combination of ChoicePoint and very successful LexisNexis Risk Information and Analytics Group ('RIAG') creates for Reed Elsevier a position as a world leading provider of risk information and analytics by adding a major presence in the insurance segment and complementary products and new capabilities in the screening, authentication and public records areas.

Restructuring programme on track to deliver the targeted margin improvement


  • Significant progress made: data centres being consolidated; global procurement organisation established; real estate consolidation and global facilities management in place; further outsourcing and offshoring of production, development engineering, content management and data fabrication, and information systems engineering and support; consolidation in management organisation, operations, customer service and product development.

  • Targeted £15m/€19m incremental savings in 2008 on track; targeted cumulative savings of £245m/€310m by 2011 on track, delivering accelerated margin improvement.

  • Total exceptional restructuring costs expected to be £140m/€180m as planned, most of which will be incurred in 2008; £39m/€50m charged in first half.

  • Major restructuring programme capitalises on opportunities from the reshaping of the portfolio and good progress on earlier cost initiatives. Targeted annual savings are over and above normal expected annual margin improvement and additional investment.

     

    Operating and financial review

     
     
    £
     
     
     
     
     
    %
     
    Six months ended 30 June
     
    Six months ended 30 June
     
     
     
    2008   
    £m   
    2007  
    £m  
     
    Change
    %
     
    2008
    €m
    2007 
    €m 
     
    Change
    %
     
    Change at
    constant
    currencies
    CONTINUING OPERATIONS
     
     
     
     
     
     
     
     
     
    Revenue
     
     
     
     
     
     
     
     
     
    Elsevier
    771    
    711   
    +8%
     
    995
    1,052 
    -5%
     
    +3%
    LexisNexis
    822    
    764   
    +8%
     
    1,060
    1,131 
    -6%
     
    +6%
    Reed Exhibitions
    377    
    315   
    +20%
     
    486
    466 
    +4%
     
    +9%
    Total
    1,970    
    1,790   
    +10%
     
    2,541
    2,649 
    -4%
     
    +5%
    Adjusted operating profit
     
     
     
     
     
     
     
     
     
    Elsevier
    236    
    201   
    +17%
     
    304
    298 
    +2%
     
    +12%
    LexisNexis
    194    
    176   
    +10%
    %
     
    250
    260 
    -4%
     
    +9%
    Reed Exhibitions
    128    
    100   
    +28%
     
    165
    148 
    +11%
     
    +16%
    Unallocated items
    (1)   
    (2)  
     
     
    (1)
    (3)
     
     
     
    Total
    557    
    475   
    +17%
     
    718
    703 
    +2%
     
    +12%
     
     
     
     
     
     
     
     
     
     
    DISCONTINUED OPERATIONS
     
     
     
     
     
     
     
     
     
    Revenue
     
     
     
     
     
     
     
     
     
    Reed Business Information
    484    
    445   
    +9%
     
    624
    659 
    -5%
     
    +3%
    Harcourt Education
    12    
    322   
     
     
    16
    477 
     
     
     
    Total
    496    
    767   
     
     
    640
    1,136 
     
     
     
    Adjusted operating profit
     
     
     
     
     
     
     
     
     
    Reed Business Information
    62    
    55   
    +13%
     
    80
    81 
    -1%
     
    +7%
    Harcourt Education
    –    
    (12)  
     
     
    (18)
     
     
     
    Total
    62    
    43   
     
     
    80
    63 
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     




Adjusted figures and constant currency growth rates are used by Reed Elsevier as additional performance measures. Adjusted operating profit is stated before the amortisation of acquired intangible assets, and exceptional restructuring and acquisition integration costs, and is grossed up to exclude the equity share of taxes in joint ventures. Exceptional restructuring costs relate to the major restructuring programme announced in February 2008. Constant currency growth rates are based on 2007 full year average and hedge exchange rates

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, excluding acquisitions and disposals.The reported operating profit figures are set out in note 2 to the combined financial information and reconciled to the adjusted figures in note 6.


The sale of Harcourt Assessment closed in January 2008, completing the divestment of the Harcourt Education division most of which took place in 2007. No contribution to adjusted operating profit was made by Harcourt Education in 2008.


 



FORWARD LOOKING STATEMENTS

This Interim Statement contains forward looking statements within the meaning of Section 27A of the US Securities Act 1933, as amended, and Section 21E of the US Securities Exchange Act 1934, as amended. These statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such forward looking statements. The terms 'expect', 'should be', 'will be' 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: general economic conditions in Reed Elsevier's markets; exchange rate fluctuations; customers' acceptance of our products and services; the actions of competitors; legislative, fiscal and regulatory developments; changes in law and legal interpretations affecting Reed Elsevier's intellectual property rights and internet communications; the impact of technological change; and the failure to obtain regulatory approval for the acquisition of ChoicePoint, Inc.

  Elsevier



£






%


Six months ended 30 June


Six months ended 30 June




2008
£m

2007
£m


Change

%


2008
€m

2007
€m


Change

%


Change
at constant

currencies

Revenue










Science & Technology

413

390

+6%


533

577

-8%


+1%

Health Sciences

358

321

+12%


462

475

-3%


+7%


771

711

+8%


995

1,052

-5%


+3%

Adjusted operating profit

236

201

+17%


304

298

+2%


+12%

Adjusted operating margin

30.6%

28.3%

+ 2.3pts


30.6%

28.3%

+2.3pts


+2.5pts














Elsevier has had a successful first half, with good underlying revenue growth and margin improvement.


Revenues and adjusted operating profits were up 5% and 10% respectively at constant currencies before acquisitions and disposals. After portfolio effects, most notably last year's sale of the MDL software business, revenues were up 3% and adjusted operating profits up 12% at constant currencies. The overall adjusted operating margin improved by 2.3 percentage points, or 1.5 percentage points underlying, driven by revenue growth and cost efficiency most particularly in production.


The Science & Technology business saw revenue growth of 1% at constant currencies after disposals. Underlying revenue growth was 6% reflecting the increasing revenue momentum from investment in new content, the widening of distribution through greater marketing and sales focus on targeted market segments, and new product development. ScienceDirect and journal subscription renewals are on track for another record year (the 2007 renewal rate was 97%) and online usage continues to grow at over 20%. The Scopus abstract and indexing database is showing strong growth and the first half saw significant expansion of the e-book programme. Significant work continues in developing the solutions product pipeline focusing on content integration and inter-operability to deliver contextualised answers instead of documents. 


In Health Sciences, revenue growth was 7% at constant currencies, including acquisitions, or 4% underlying held back by weakness in the pharma advertising market.  As in previous years, the second half is expected to be stronger reflecting the seasonal weighting of the publishing programme. The Clinical Solutions business performed well with new publishing and strong demand for workflow solutions that integrate content and predictive analytical algorithms to meet the needs of practitioners. The Nursing and Health Professionals segment also saw good growth in online product revenue and usage. During the first half Health Sciences continued to invest in its e-Health growth strategy, focusing on migration of print to online information and on solution product development in clinical decision support, education and pharma business intelligence. The acquisition in March of Windhover Information Inc added business intelligence content and capabilities in pharma drug pipeline management.


The second half should see good underlying revenue growth with growing online sales and a strong publishing programme, and good margin development with ongoing cost efficiency.



  LexisNexis



£






%


Six months ended 30 June


Six months ended 30 June




2008
£m

2007
£m


Change

%


2008
€m

2007
€m


Change

%


Change
at constant

currencies

Revenue










United States

571

544

+5%


736

805

-9%


+5%

International

251

220

+14%


324

326

-1%


+7%


822

764

+8%


1,060

1,131

-6%


+6%

Adjusted operating profit

194

176

+10%


250

260

-4%


+9%

Adjusted operating margin

23.6%

23.0%

+0.6pts


23.6%

23.0%

+0.6pts


+0.7pts














LexisNexis has had a solid start to the year with good growth in online information solutions in the US and internationally and a particularly strong performance in risk information and analytics markets.


Revenues and adjusted operating profits increased by 6% and 9% respectively at constant currencies, or 5% and 9% before acquisitions. The underlying revenue growth is a little behind the prior year growth rate reflecting the economic environment although the second half should see faster growth through new solutions product sales. The overall adjusted operating margin improved by 0.6 percentage point, or 0.9 percentage point underlying before lower margin acquisitions which are in development phase. Further margin improvement is expected in the second half reflecting the timing of investment and benefit from cost actions takenincluding consolidation of the US organisation and outsourcing of production and development engineering activities.


LexisNexis US revenues were 5% ahead at constant currencies, or 4% underlying before acquisitions. In US legal markets, strong growth in large law firms, litigation services and practice management was tempered by year on year publication phasing and continued low growth in corporate and government markets other than risk. The risk information and analytics group saw double digit revenue growth driven by a strong performance in the collections sector and in government. LexisNexis US made good progress in the realignment of its organisation to support the Total Solutions strategy. Management responsibilities have been consolidated across US Legal and Corporate and Public Markets other than Risk. The transformation of the sales organisation through the integration of sales forces, an upgrade in capabilities and the deployment of solution selling methodologies, tools and processes is now implemented in the large law firm segment and is in progress in small law, corporate and government. Repositioning of the brand to support the Solutions strategy is underway together with further upgrading and consolidation of the marketing organisation. Significant product enhancements have been launched to improve usability and functionality, and new content and workflow solutions have been introduced. Work is also underway to significantly enhance the productivity of US legal research with modernised technology and advanced functionality to provide much more powerful contextual solutions for customers and at greater speed.


The LexisNexis International business outside the US saw revenue growth of 7at constant currencies, or 6% underlying, driven by the growing penetration of its online information services across its markets and new publishing. Good growth was seen in the UKFrance, Southern Africa and Asia. The business has continued to expand its workflow solutions offerings and its geographical presence, particularly in Asia, through organic development and selective acquisition, including a leading legal publisher in India. In April the Latin American business was sold as it did not offer sufficiently attractive strategic and financial returns.


The second half should see good revenue growth for LexisNexis, building on the growing demand for online solutions and phasing of new product initiatives. Whilst legal markets are not immune to the slowdown in the US and internationally, there is good momentum in online information and solutions that enhance customer productivity. Further margin development in the second half is expected from the revenue growth and ongoing cost initiatives.



  Reed Exhibitions



£






%


Six months ended 30 June


Six months ended 30 June




2008
£m

2007
£m


Change

%


2008
€m

2007
€m


Change

%


Change
at constant

currencies

Revenue

377

315

+20%


486

466

+4%


+9%

Adjusted operating profit

128

100

+28%


165

148

+11%


+16%

Adjusted operating margin

34.0%

31.7%

+2.3pts


34.0%

31.7%

+2.3pts


+1.8pts













Reed Exhibitions has performed well in the first half, with successful major shows and the net cycling in of biennial exhibitions.


Revenues and adjusted operating profits were up 9% and 16% respectively at constant currencies, or 11% and 19% excluding acquisitions and disposals. The strong growth was driven by good performances in annual shows and new launches together with the cycling in of non-annual shows. Excluding cycling and other first half/second half timing effects, underlying revenue growth was 5%. The overall adjusted operating margin improved 2.3 percentage points, largely due to the effect of the significant net cycling in at the show contribution level.  The adjusted operating margin in the first half is higher than for the year as a whole due to the seasonality of revenues (2007 full year adjusted operating margin was 24%).


Strong growth was seen across most of the show portfolio with particular success at the PGA Merchandise golf equipment show, the ISC West security show, the National Hardware show and the JCK jewellery show in the US; the SITL transport and logistics show and the Interclima Interconfort heating/cooling systems show in Paris; the Mipim international property show in Cannes; and the London Book Fair. The severe downturn in the Spanish residential property market did however significantly reduce the size of the SIMA residential property show in Madrid. The most significant non-annual show cycling in was the Mostra Convegno Expocomfort show in Milan. In Japan, M-Tech and other technology shows performed particularly strongly. The Brazilian joint venture established last year is developing strongly and the growth experienced in the Salao de Automovel exhibition was amongst the highest in the portfolio. 


During the first half Reed Exhibitions launched fourteen new shows including the very successful Photovoltaic Power Generation event in Tokyo and acquired six others, expanding its footprint in the Middle East, RussiaIndia and China. The sale of the defence sector shows was completed in May 2008. This will exaggerate the year on year impact of show cycling in 2009 and beyond with no 'odd' year DSEi show to balance the 'even' year benefit of Mostra Convegno and other biennial shows.


The exhibitions business has performed well given the uncertain economic environment. Whilst the exhibition business is affected by economic cycles, the importance of the individual shows to the industries they serve, the late-cycle nature of the business and the broad sector and geographic spread have historically provided some resilience. With the majority of exhibition revenue in the first half, and good visibility on exhibitor demand for the second half, the outlook for the year remains good.


  Discontinued operations - Reed Business Information



£






%


Six months ended 30 June


Six months ended 30 June




2008
£m

2007
£m


Change

%


2008
€m

2007
€m


Change

%


Change
at constant

currencies

Revenue










UK

153

144

+6%


197

213

-8%


+6%

US

139

140

-1%


179

208

-14%


-1%

NL

100

88

+14%


129

130

-1%


-2%

International

92

73

+26%


119

108

+10%


+10%


484

445

+9%


624

659

-5%


+3%

Adjusted operating profit

62

55

+13%


80

81

-1%


+7%

Adjusted operating margin

12.8%

12.3%

+0.5pts


12.8%

12.3%

+0.5pts


+0.5pts












Following announcement in February 2008 of the planned divestment of Reed Business Information, the division is presented as a discontinued operation.



Reed Business Information has performed well in the first half, with rapid growth in online information services more than compensating for print declines. Tight cost management has allowed the business to invest further in online opportunities whilst delivering margin improvement.


Revenue and adjusted operating profits increased by 3% and 7% respectively at constant currencies, or 2% and 6% before acquisitions and disposals. Continued strong growth in online services of 20% more than compensated for a 4% decline in print as the business migrates online. Online revenues now contribute 34% of RBI's revenues.  


In the UK, underlying revenues were up 5% reflecting strong growth in online sales, up 16% and which now represent over 50% of total RBI UK revenue. Totaljobs, the leading UK recruitment site, continued its rapid growth with revenues up 31%. Whilst some weakness has been seen in sectors such as property and technology, overall momentum is encouraging driven by the growing demand for online services which provide quicker and easier access to more comprehensive and searchable data for users and increased marketing effectiveness for advertisers. In addition to organic development, RBI UK has made a number of small acquisitions in the first half to further develop its online services to the energy, aerospace and personnel verticals as well as in horizontal RFQ matching of vendors and buyers.


In the US, RBI underlying revenue was 1% lower, with online revenue growing strongly, up 15%, offset by a 7% decline in print which was exacerbated by the effect on the media group of the film and TV screenwriters' strike. The BuyerZone RFQ business, matching vendors and buyers in procurement tendering, continued to grow rapidly and the construction data business had a solid first half with growing traction of its online lead generation services. Advertising revenues grew strongly across community sites, up 19%, with their mix of professional content, community interaction and online tools proving attractive for both users and advertisers.


In the Netherlands, underlying revenue growth was 2%, with online revenues up 19% against a 1% decline in the print business which benefits from a higher proportion of subscription and circulation revenues than in other RBI geographies. Online advertising growth was 33% driven by recruitment and lead generation services. In the International business (rest of Europe and Asia Pacific), underlying revenue growth was 3% with online revenues up 30%, with particularly strong growth from the online directory search business, more than offsetting a 3% decline in print. The first half saw launch activity in Japan and India as well as two small acquisitions to build scale in Spain and France and expand online tendering services. 


The outlook for Reed Business Information is positive. Whilst seeing some general uncertainty in markets such as property, retail and construction, RBI is seeing no significant overall shift in market trends with continued strong growth in online services. Given the uncertain economic outlook, RBI remains vigilant to market developments. Continued cost actions are expected to deliver overall margin improvement after additional investment in expanding online services.


  Financial review


REED ELSEVIER COMBINED BUSINESSES


Currency

The average exchange rates in the first half saw the euro strengthen 15% against both the US dollar and sterling, with a favourable effect on translation of reported growth rates expressed in sterling and an adverse effect on growth rates expressed in euros.


Income statement

Revenue from continuing operations (ie excluding Reed Business Information (RBI) and Harcourt Education) at £1,970m/€2,541m increased by 10% expressed in sterling and was 4% lower when expressed in euros. At constant exchange rates, revenue was 5% higher, or 6% higher before acquisitions and disposals. 


Reported figures

Continuing operations

Reported operating profit from continuing operations, after amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, at £401m/€517m, was up 8% in sterling and 6% lower in euros. The movements reflect the strong underlying operating performance less the costs of the restructuring programme, and currency translation effects.


The amortisation charge in respect of acquired intangible assets, including the share of amortisation in joint ventures, amounted to £105m/€135m, up £10m in sterling as a result of recent acquisitions, and down €6m in euros reflecting currency translation effects


Exceptional costs incurred to date in respect of the restructuring programme announced in February 2008 amounted to £39m/€50m, principally in respect of severance, outsourcing migration costs and associated property costs.


Acquisition integration costs amounted to £6m/€8m (2007: £5m/€7m). Disposals and other non operating items comprise gains on disposals of businesses and investments of £11m/€14m and fair value increases in the portfolio of venture capital investments of £5m/€6m.


The reported profit before tax, including amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, and non operating items, at £350m/€451m, was up 14% expressed in sterling and down 1% expressed in euros compared to the 200first half.

 

The reported tax charge of £76m/€98m compares with a charge of £76m/€112m in the prior first half. 


Discontinued operations

The reported operating profit of RBI of £47m/€61m was up £6m/€nil on the prior year, principally reflecting the underlying operating performance and the cessation of amortisation of intangible assets following the divestment announcement.


The gain on the disposal of discontinued operations was £56m/€57m, principally on the disposal of Harcourt Assessment (2007: £74m/€113m, on sale of Harcourt Education International businesses), after £27m/€54m of recycled cumulative currency translation losses since the adoption of IFRS previously taken to reserves. Taxes on the disposals were £48m/€62m (2007: £2m/€3m).


Total operations

The reported attributable profit of £309m/€383m compares with a reported attributable profit of £311m/€464m in the first half of 2007, reflecting the strong operating performance, the respective first half disposals of Harcourt Education businesses and currency translation effects.


Adjusted figures

Adjusted figures are used by Reed Elsevier as additional performance measures and are stated before amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, and, in respect of earnings, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term. Exceptional restructuring costs relate to the major restructuring programme announced in February 2008. Profit and loss on disposals and other non operating items are also excluded from the adjusted figures. Comparison at constant exchange rates uses 2007 full year average and hedge exchange rates.


Continuing operations

Adjusted operating profit for the continuing operations, at £557m/€718m, was up 17% expressed in sterling and up 2% in euros. At constant exchange rates, adjusted operating profits were up 12%, or 11before acquisitions and disposals. 


The net pension expense (excluding the unallocated net pension financing credit) was £21m/€27m (2007: £24m/€36m) reflecting higher discount rates and lower pension curtailment creditsThe net pension financing credit was £20m/€26m (2007: £19m/€28m). The charge for share based payments was £18m/€23m (2007: £15m/€22m). Restructuring costs, other than in respect of the exceptional restructuring programme announced in February and acquisition integration, were £4m/€5m (2007: £5m/€7m).


Overall adjusted operating margin for thcontinuing businesses was up 1.8 percentage points (1.4 percentage points underlying) at 28.3% reflecting the benefits of good revenue growth and cost efficiency. 


Net finance costs, at £67m/€86m, were £3m/€18m lower than in the prior first half reflecting free cash flow less acquisition financing and, when expressed in euros, currency translation effects. The financing costs of share repurchases were offset by the benefit of the Harcourt Education proceeds prior to the return of net proceeds to shareholders


Adjusted profit before tax from continuing operations was £490m/€632m, up 21% compared to the prior first half expressed in sterling and 6% in euros. At constant exchange rates, adjusted profit before tax grew by 15%.


The effective tax rate on adjusted profit before tax for the continuing businesses, at 23%, was similar to the rate in 2007. The effective tax rate on adjusted profit before tax excludes movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term, and more closely aligns with cash tax costs. Adjusted operating profits and taxation are also grossed up for the equity share of taxes in joint ventures.


The adjusted profit from continuing operations attributable to shareholders of £378m/€487m was up 21% compared to the prior first half expressed in sterling and 5% in euros. At constant exchange rates, adjusted profit attributable to shareholders was up 15% for continuing operations. 


Discontinued operations

Adjusted operating profit from discontinued operations was £62m/€80m, up £19m/€17m from the prior first half, reflecting the underlying performance of RBI and the absence of the first half seasonal losses of Harcourt Education.


Total operations

The adjusted profit attributable to shareholders, including discontinued operations, was £421m/€543m, up 24% expressed in sterling and 8% expressed in euros. At constant exchange rates, adjusted profit attributable to shareholders from total operations was up 17%. The effective tax rate on the profit from total operations, at 24%, was similar to the effective rate for 2007. 


The adjusted profit before tax for total operations if stated including the adjusted operating profits of discontinued operations would have been £552m/ €712m in the first half, compared to £448m/€662m in the prior first half.


Cash flows and debt

Adjusted operating cash flow from continuing operations was £523m/€675m, up 23% on the prior first half expressed in sterling and up 7% in euros, or up 16% at constant currencies. The rate of conversion of adjusted operating profits into cash flow for continuing businesses in the first half was 94% (2007: 90%). The first half cash flow conversion is somewhat variable reflecting the seasonality of operating cash flows particularly in relation to advance subscription receipts and exhibition deposits, and the timing of capital spend. 


Capital expenditure included within adjusted operating cash flow from continuing operations was £56m/€72m (2007: £56m/€83m), including £43m/€55m in respect of capitalised development costs included within intangible assets. 


Free cash flow from continuing operations - after interest and taxation - was £376m/€485m, up £125m/€114m on the prior first half, largely due to the stronger operating cash flow performance and the higher taxes paid in the prior first half (reversal of earlier favourable timing).


Dividends paid to shareholders in the first half, relating to the 2007 final dividend, amounted to £298m/€385m (2007: £299m/€443m). The special distribution paid to shareholders in January 2008 from the proceeds of the Harcourt disposal amounted to £2,013m/€2,690m (including £27m/€35m paid to the employee benefit trust)Share repurchases by the parent companies amounted to £39m/€50m. Shares of the parent companies purchased by the employee benefit trust to meet future obligations in respect of share based remuneration amounted to £55m/€71m. Net proceeds from the exercise of share options were £45m/€58m.


Spend on acquisitions in the continuing operations was £125m/€161m, including £22m/€28m in respect of prior year acquisitions. Including deferred consideration payable, an amount of £83m/€105m was capitalised as acquired intangible assets and £34m/€43m as goodwill. Acquisition integration spend in respect of these and other recent acquisitions amounted to £7m/€9m. Exceptional restructuring spend in relation to the restructuring programme announced in February 2008 was £14m/€18m.


Free cash flow from discontinued operations was £34m/€43m. Proceeds from the sale of discontinued operations in the first half were £319m/€430m and taxes paid on completed disposal, were £249m/€321m. Other non-operating cash out flows of discontinued operations were £100m/€129m relating to acquisition spend, transaction costs and transition costs, including reorganisation and separation.  


Net borrowings at 30 June 2008 were £2,579m/ €3,250m, an increase of £2,087m/€2,581m since 31 December 2007, principally reflecting the payment of the special distribution, the 2007 final dividend, share repurchases and acquisition spend, partly offset by the free cash flow from continuing operations, proceeds from the exercise of share options and disposals, and cash flows from discontinued operations.  Expressed in sterling, currency translation differences increased net borrowings by £11m, reflecting the impact of the strengthening of the euro over the period on euro denominated net debt. Expressed in euros, currency translation differences decreased net borrowings by €171m, reflecting the strengthening of the euro against predominantly US dollar denominated debt 


Gross borrowings after fair value adjustments at 30 June 2008 amounted to £3,293m/€4,149m, denominated mostly in US dollars. The fair value of related derivative assets was £211m/€265m. Cash balances totalled £503m/€634m. The net pension deficit, i.e. pension obligations less pension assets, at 30 June 2008 was £20m/€25m which compares with a net surplus as at 31 December 2007 of £50m/€68m. The movement principally reflects a decline in asset values since the beginning of the year


PARENT COMPANIES


For the parent companies, Reed Elsevier PLC and Reed Elsevier NV, adjusted earnings per share for total operations were respectively up 42% at 20.3p (2007: 14.3p) and up 25% at 0.40 (2007: €0.32). At constant rates of exchange, the adjusted earnings per share of both companies increased by 35% over the prior first half.


The first half adjusted earnings per share growth is boosted by the effect of the Harcourt Education sale in that £12m/€18m of seasonal first half losses are not repeated and earnings per share benefits from the 13.4% share consolidation on the return of net proceeds to shareholders in January 2008. This effect will largely reverse in the second half when all the annual operating profits of the Harcourt Education business would have arisen. 


The reported earnings per share for Reed Elsevier PLC shareholders was 14.1p (2007: 12.5p) and for Reed Elsevier NV shareholders was €0.28 (2007: €0.30). 

From continuing operations, the reported earnings per share for Reed Elsevier PLC was 12.4p (2007: 9.1p) and for Reed Elsevier NV was €0.26 (2007: €0.22). 


The equalised interim dividends are 5.3p per share for Reed Elsevier PLC and €0.114 per share for Reed Elsevier NV, 18higher and unchanged respectively compared with the prior first half. (The difference in growth rates in the equalised dividends reflects the significant strengthening of the euro against sterling since the prior interim dividend declaration date.) Currency considerations aside, the dividend increase reflects the strong first half performance and positive outlook.


On 18 January 2008, the special distribution was paid to shareholders in the equalisation ratio from the estimated net proceeds of the sale of the Harcourt Education division. The distribution was 82.0p per share for Reed Elsevier PLC and €1.767 per share for Reed Elsevier NV and amounted to £2,013m/€2,690m in aggregate.


The special distribution was accompanied by a consolidation of the ordinary share capital of Reed Elsevier PLC and Reed Elsevier NV on the basis of 58 new ordinary shares for every 67 existing ordinary shares. This represented a 13.4% consolidation of ordinary share capital, being the aggregate special distribution expressed as a percentage of the combined market capitalisation of Reed Elsevier PLC and Reed Elsevier NV (excluding the 5.8% indirect equity interest in Reed Elsevier NV held by Reed Elsevier PLC), as at the date of the announcement of the special distribution.


For the purposes of calculating earnings per share, the effective date of the share consolidation is deemed to be 18 January 2008, being the date on which the special distribution was paid.


PRINCIPAL RISKS AND UNCERTAINTIES

 

The principal risks and uncertainties which could affect the combined businesses for the remainder of the financial year remain unchanged from those set out on pages 88 and 89 of the Reed Elsevier Annual Reports and Financial Statements 2007Risks include: changes in the acceptability of our products services and prices by our customers; the effect of weaker economic conditions; the adverse impact of new technologies and regulations on our products and services; the failure, interruption or breach of our electronic delivery platforms; the circumvention of our proprietary rights over intellectual property; and the failure of third parties to whom we have outsourced.

 

 

 

Combined financial information

 

Combined income statement

For the six months ended 30 June 2008







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007
£m

2007
€m



2008
£m

2007
£m


2008
€m

2007
€m

3,678

5,370


Revenue - continuing operations

1,970

1,790


2,541

2,649

(1,339)

(1,955)


Cost of sales

(752)

(686)


(970)

(1,015)

2,339

3,415


Gross profit

1,218

1,104


1,571

1,634

(683)

(998)


Selling and distribution costs

(364)

(336)


(469)

(497)

(875)

(1,277)


Administration and other expenses

(465)

(408)


(600)

(605)

781

1,140


Operating profit before joint ventures

389

360


502

532

16

23


Share of results of joint ventures

12

11


15

17

797

1,163


Operating profit - continuing operations

401

371


517

549

43

63


Finance income

25

18


32

26

(182)

(266)


Finance costs

(92)

(88)


(118)

(130)

(139)

(203)


Net finance costs

(67)

(70)


(86)

(104)

62

91


Disposals and other non operating items

16

7


20

10

720

1,051


Profit before tax - continuing operations

350

308


451

455

109

159


Taxation

(76)

(76)


(98)

(112)

829

1,210


Net profit from continuing operations

274

232


353

343

374

503


Net profit from discontinued operations

36

80


31

122

1,203

1,713


Net profit for the period

310

312


384

465













Attributable to:






1,200

1,709


Parent companies' shareholders

309

311


383

464

3

4


Minority interests

1

1


1

1

1,203

1,713


Net profit for the period

310

312


384

465










Net profit from discontinued operations is analysed in note 3.


Adjusted profit figures are presented in note 6 as additional performance measures.



Combined cash flow statement

For the six months ended 30 June 2008







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Cash flows from operating activities - 
continuing operations






1,066

1,556


Cash generated from operations

544

466


702

689

26

38


Interest received

29

13


37

19

(174)

(254)


Interest paid

(86)

(68)


(111)

(101)

(212)

(310)


Tax paid

(84)

(120)


(108)

(177)

706

1,030


Net cash from operating activities

403

291


520

430













Cash flows from investing activities - 
continuing operations






(272)

(397)


Acquisitions

(125)

(206)


(161)

(305)

(52)

(76)


Purchases of property, plant and equipment

(13)

(19)


(17)

(28)

(71)

(104)


Expenditure on internally developed 
intangible assets

(43)

(37)


(55)

(55)

(4)

(6)


Purchase of investments

-

(3)


-

(4)

3

5


Proceeds from disposals of property, 
plant and equipment

1

-


1

-

79

115


Proceeds from other disposals

20

3


26

4

12

18


Dividends received from joint ventures

13

10


17

15

(305)

(445)


Net cash used in investing activities

(147)

(252)


(189)

(373)













Cash flows from financing activities - 
continuing operations






(416)

(607)


Dividends paid to shareholders of the 
parent companies

(2,284)

(299)


(3,040)

(443)

111

163


(Decrease)/increase in bank loans, overdrafts and 
commercial paper

(11)

293


(14)

433

276

403


Issuance of other loans

73

148


94

219

(311)

(454)


Repayment of other loans

-­

(152)


-

(225)

(12)

(18)


Repayment of finance leases

(3)

(5)


(4)

(7)

-

-


Redemption of debt related derivative financial instrument

10

-


13

-

177

258


Proceeds on issue of ordinary shares

45

156


58

231

(273)

(399)


Purchase of treasury shares

(94)

(61)


(121)

(90)

(448)

(654)


Net cash (used in)/from financing activities

(2,264)

80


(3,014)

118










1,964

2,750


Net cash from/(used in) discontinued operations

4

(66)


23

(97)










1,917

2,681


(Decrease)/increase in cash and cash equivalents

(2,004)

53


(2,660)

78













Movement in cash and cash equivalents






519

774


At start of period

2,467

519


3,355

774

1,917

2,681


(Decrease)/increase in cash and cash equivalents

(2,004)

53


(2,660)

78

31

(100)


Exchange translation differences

40

(2)


(61)

(3)

2,467

3,355


At end of period

503

570


634

849










Net cash from discontinued operations is analysed in note 3. 


Adjusted operating cash flow figures are presented in note 6 as additional performance measures.


Combined balance sheet

As at 30 June 2008







£



As at 31 December



As at 30 June


As at 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Non-current assets






2,462

3,348


Goodwill

2,307

2,414


2,907

3,597

2,089

2,841


Intangible assets

1,910

2,106


2,407

3,138

116

158


Investments in joint ventures

126

103


159

154

111

151


Other investments

106

54


133

80

239

325


Property, plant and equipment

168

235


212

350

183

249


Net pension assets

103

317


130

472

141

192


Deferred tax assets

87

82


109

122

5,341

7,264



4,807

5,311


6,057

7,913




Current assets






271

368


Inventories and pre-publication costs

277

256


349

382

1,148

1,561


Trade and other receivables

761

833


959

1,241

210

286


Derivative financial instruments

255

165


321

246

2,467

3,355


Cash and cash equivalents

503

570


634

849

4,096

5,570



1,796

1,824


2,263

2,718

341

464


Assets held for sale

817

1,585


1,029

2,362

9,778

13,298


Total assets

7,420

8,720


9,349

12,993













Current liabilities






1,966

2,674


Trade and other payables

1,417

1,508


1,785

2,246

22

30


Derivative financial instruments

33

39


42

58

1,127

1,533


Borrowings

1,185

1,034


1,493

1,541

752

1,023


Taxation

564

395


710

589

3,867

5,260



3,199

2,976


4,030

4,434




Non-current liabilities






2,002

2,723


Borrowings

2,108

2,141


2,656

3,190

695

945


Deferred tax liabilities

611

780


770

1,162

133

181


Net pension obligations

123

121


155

180

21

28


Provisions

42

23


53

36

2,851

3,877



2,884

3,065


3,634

4,568

84

114


Liabilities associated with assets held for sale

411

319


518

475

6,802

9,251


Total liabilities

6,494

6,360


8,182

9,477

2,976

4,047


Net assets

926

2,360


1,167

3,516













Capital and reserves






197

268


Combined share capitals

200

194


252

289

2,143

2,914


Combined share premiums

2,267

2,033


2,856

3,029

(619)

(842)


Combined shares held in treasury

(723)

(392)


(911)

(584)

(145)

(170)


Translation reserve

(177)

(176)


(140)

(260)

1,389

1,862


Other combined reserves

(651)

688


(903)

1,023

2,965

4,032


Combined shareholders' equity

916

2,347


1,154

3,497

11

15


Minority interests

10

13


13

19

2,976

4,047


Total equity

926

2,360


1,167

3,516










Approved by the boards of Reed Elsevier PLC and Reed Elsevier NV, 30 July 2008.


Combined statement of recognised income and expense

For the six months ended 30 June 2008







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




1,203

1,713


Net profit for the period

310

312


384

465










(33)

(350)


Exchange differences on translation of 
foreign operations

29

(41)


(106)

(57)

224

327


Actuarial (losses)/gains on defined benefit pension schemes

(119)

388


(154)

574

-

- 


Fair value movements on available for sale investments

(1)

-


(1)

-

3

4


Fair value movements on cash flow hedges

1

12


1

18

(50)

(73)


Tax recognised directly in equity

25

(96)


32

(142)

144

(92)


Net (expense)/income recognised directly 
in equity

(65)

263


(228)

393










148

206


Cumulative exchange differences on disposal of foreign operations

27

1


54

(2)

(7)

(10)


Cumulative fair value movements on disposal of available for sale investments

-

(1)


-

(1)

(20)

(29)


Transfer to net profit from hedge reserve (net of tax)

(9)

(10)


(12)

(15)

1,468

1,788


Total recognised income and expense
for the period

263

565


198

840













Attributable to:






1,465

1,784


Parent companies' shareholders

262

564


197

839

3

4


Minority interests

1

1


1

1

1,468

1,788


Total recognised income and expense
for the period

263

565


198

840



















Combined reconciliation of shareholders' equity

For the six months ended 30 June 2008







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




1,465

1,784


Total recognised net income attributable to the parent companies' shareholders

262

564


197

839

(416)

(607)


Dividends declared

(2,284)

(299)


(3,040)

(443)

177

258


Issue of ordinary shares, net of expenses

45

156


58

231

(273)

(399)


Increase in shares held in treasury

(94)

(61)


(121)

(90)

46

67


Increase in share based remuneration reserve

22

21


28

31

999

1,103


Net (decrease)/increase in combined shareholders' equity

(2,049)

381


(2,878)

568

1,966

2,929


Combined shareholders' equity at start of period

2,965

1,966


4,032

2,929

2,965

4,032


Combined shareholders' equity at end of period

916

2,347


1,154

3,497











 

Notes to the combined financial information


 

1    Basis of preparation

The Reed Elsevier combined financial information ('the combined financial information') represents the combined interests of the Reed Elsevier PLC and Reed Elsevier NV shareholders and encompasses the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV and their respective subsidiaries, associates and joint ventures, together with the two parent companies, Reed Elsevier PLC and Reed Elsevier NV ('the combined businesses').


The combined financial information, presented in condensed form, has been prepared in accordance with IAS34 - Interim Financial Reporting and the Reed Elsevier accounting policies. The Reed Elsevier accounting policies are in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and as issued by the International Accounting Standards Board, and are set out in the Reed Elsevier Annual Reports and Financial Statements 2007 on pages 96 to 100. Financial information is presented in both sterling and euros.


The combined financial information for the six months ended 30 June 2008 and the comparative amounts to 30 June 2007 are unaudited but have been reviewed by the auditors. The combined financial information for the year ended 31 December 2007 
has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2007, which received an unqualified audit report.


2    Segment analysis

Reed Business Information, previously presented within the Reed Business segment, has been classified as a discontinued operation and its results for the period are presented in note 3. Reed Exhibitions, previously presented within the Reed Business segment, is presented as a separate business segment.


Revenue - continuing operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Business segment






1,507

2,200


Elsevier

771

711


995

1,052

1,594

2,328


LexisNexis

822

764


1,060

1,131

577

842


Reed Exhibitions

377

315


486

466

3,678

5,370


Total

1,970

1,790


2,541

2,649




Geographical origin






1,856

2,710


North America

961

905


1,240

1,339

617

901


United Kingdom

289

278


373

411

324

473


The Netherlands

195

175


251

259

598

873


Rest of Europe

366

287


472

425

283

413


Rest of world

159

145


205

215

3,678

5,370


Total

1,970

1,790


2,541

2,649




Geographical market






1,932

2,821


North America

1,000

950


1,290

1,406

377

550


United Kingdom

162

175


209

259

36

53


The Netherlands

20

17


26

25

749

1,093


Rest of Europe

457

358


589

530

584

853


Rest of world

331

290


427

429

3,678

5,370


Total

1,970

1,790


2,541

2,649













Adjusted operating profit - continuing operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Business segment






477

696


Elsevier

236

201


304

298

406

593


LexisNexis

194

176


250

260

139

203


Reed Exhibitions

128

100


165

148

1,022

1,492


Subtotal

558

477


719

706

(45)

(66)


Corporate costs

(21)

(21)


(27)

(31)

39

57


Unallocated net pension credit

20

19


26

28

1,016

1,483


Total

557

475


718

703




Geographical origin






473

690


North America

232

201


299

297

171

250


United Kingdom

87

64


112

95

155

226


The Netherlands

90

92


116

136

157

229


Rest of Europe

112

79


145

117

60

88


Rest of world

36

39


46

58

1,016

1,483


Total

557

475


718

703










Adjusted operating profit figures are presented as additional performance measures. They are stated before the amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, and are grossed up to exclude the equity share of taxes in joint ventures. Adjusted figures are reconciled to the reported figures in note 6. The unallocated net pension credit of £20m/€26m (2007: £19m/€28m) comprises the expected return on pension scheme assets of £108m/€139m (2007: £98m/€145m) less interest on pension scheme liabilities of £88m/€113m (2007: £79m/€117m).


Operating profit - continuing operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Business segment






410

598


Elsevier

183

168


236

249

287

419


LexisNexis

116

120


150

178

106

155


Reed Exhibitions

108

85


139

125

803

1,172


Subtotal

407

373


525

552

(45)

(66)


Corporate costs

(26)

(21)


(34)

(31)

39

57


Unallocated net pension credit

20

19


26

28

797

1,163


Total

401

371


517

549




Geographical origin






334

488


North America

135

133


174

197

146

213


United Kingdom

71

52


92

77

155

226


The Netherlands

82

92


106

136

109

159


Rest of Europe

81

57


104

84

53

77


Rest of world

32

37


41

55

797

1,163


Total

401

371


517

549










Share of post-tax results of joint ventures of £12m/€15m (2007: £11m/€17m) included in operating profit comprises £2m/€2m (2007: £2m/€3m) relating to LexisNexis and £10m/€13m (2007: £9m/€14m) relating to Reed Exhibitions.


3    Discontinued operations

Discontinued operations comprise the results of Reed Business Information ('RBI'), the planned divestment of which was announced in February 2008, and the Harcourt Education division.  The disposal of the Harcourt Education International business completed in May and August 2007; the disposal of the Harcourt US K-12 Education business completed in December 2007; and the disposal of the Harcourt Assessment business completed in January 2008.


Net profit from discontinued operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




1,658

2,421


Revenue

496

767


640

1,136

(1,455)

(2,124)


Operating costs

(449)

(748)


(579)

(1,108)

203

297


Operating profit and profit before tax

47

19


61

28

(61)

(89)


Taxation

(19)

(11)


(25)

(16)

142

208


Profit after taxation

28

8


36

12

612

850


Gain on disposals

56

74


57

113

(380)

(555)


Tax on disposals

(48)

(2)


(62)

(3)

374

503


Net profit from discontinued operations

36

80


31

122











Revenue, adjusted operating profit and operating profit from discontinued operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m







Revenue






906

1,323


Reed Business Information

484

445


624

659

752

1,098


Harcourt Education

12

322


16

477

1,658

2,421


Total

496

767


640

1,136




Adjusted operating profit/(loss)






121

177


Reed Business Information

62

55


80

81

121

177


Harcourt Education

-

(12)


-

(18)

242

354


Total

62

43


80

63




Operating profit/(loss)






91

133


Reed Business Information

47

41


61

61

112

164


Harcourt Education

-

(22)


-

(33)

203

297


Total

47

19


61

28










Operating profit is stated after amortisation of acquired intangible assets of £4m/€5m (2007: £23m/€34m); exceptional restructuring costs of £7m/€9m (2007: nil); and acquisition integration costs of £4m/€5m (2007: £1m/€1m).


The gain on disposals of discontinued operations in 2008 relates principally to the sale of Harcourt Assessment, which completed in January 2008

 

Cash flows from discontinued operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




158

231


Net cash flow from operating activities

37

(122)


48

(180)

1,806

2,519


Net cash flow from investing activities

(33)

56


(25)

83

-

-


Net cash flow from financing activities

-

-


-

-

1,964

2,750


Net movement in cash and cash equivalents

4

(66)


23

(97)










Net cash flow from investing activities includes proceeds on the completed disposals of £319m/€430m (2007: £141m/€209m) and taxes paid on completed disposals of £249m/€321m. Cash and cash equivalents disposed was nil (2007: £6m/€9m). 


4    Assets and liabilities held for sale


The major classes of assets and liabilities of operations classified as held for sale, principally as at 30 June 2008 Reed Business Information, and as at 30 June and 31 December 2007 Harcourt Education, are as follows:







£



As at 31 December



As at 30 June


As at 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




117

160


Goodwill

279

395


352

588

89

121


Intangible assets

223

483


281

720

16

22


Property, plant and equipment

67

37


84

55

54

73


Inventories and pre-publication costs

7

418


9

623

65

88


Trade and other receivables

214

220


270

328

-

-


Deferred tax assets

27

32


33

48

341

464


Total assets held for sale

817

1,585


1,029

2,362










44

60


Trade and other payables

334

165


421

246

40

54


Deferred tax liabilities

77

154


97

229

84

114


Total liabilities associated with assets held for sale

411

319


518

475


5    Combined cash flow statement


Reconciliation of operating profit before joint ventures to cash generated from operations - continuing operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




781

1,140


Operating profit before joint ventures

389

360


502

532










192

280


Amortisation of acquired intangible assets

104

95


134

141

63

92


Amortisation of internally developed intangible assets

34

34


44

50

62

91


Depreciation of property, plant and equipment

31

31


40

46

32

46


Share based remuneration

18

15


23

22

349

509


Total non cash items

187

175


241

259

(64)

(93)


Movement in working capital

(32)

(69)


(41)

(102)

1,066

1,556


Cash generated from operations

544

466


702

689











  Reconciliation of net borrowings


Year ended

31 December







£

Six months ended 30 June

2007

£m



Cash & 

cash

equivalents

£m

Borrowings

£m

Related
derivative 

financial

instruments

£m

2008

£m

2007

£m

(2,314)


At start of period

2,467

(3,129)

170

(492)

(2,314)









1,917


(Decrease)/increase in cash and cash equivalents

(2,004)

-

-

(2,004)

53

(64)


Increase in borrowings

-

(59)

-

(59)

(284)

-


Redemption of debt related derivative financial instruments

-

-

(10)

(10)

-

1,853


Changes resulting from cash flows

(2,004)

(59)

(10)

(2,073)

(231)

(11)


Inception of finance leases

-

(1)

-

(1)

(4)

(2)


Fair value adjustments

-

(53)

51

(2)

-

(18)


Exchange translation differences

40

(51)

-

(11)

31

(492)


At end of period

503

(3,293)

211

(2,579)

(2,518)









Year ended

31 December







Six months ended 30 June

2007

€m



Cash & 

cash

equivalents

€m

Borrowings

€m

Related
derivative

financial

instruments

€m

2008

€m

2007

€m

(3,448)


At start of period

3,355

(4,256)

232

(669)

(3,448)









2,681


(Decrease)/increase in cash and cash equivalents

(2,660)

-

-

(2,660)

78

(94)


Increase in borrowings

-

(76)

-

(76)

(420)


-


Redemption of debt related derivative financial instruments


-


-


(13)


(13)


-

2,587


Changes resulting from cash flows

(2,660)

(76)

(13)

(2,749)

(342)

(16)


Inception of finance leases

-

(1)

-

(1)

(6)

(3)


Fair value adjustments

-

(68)

66

(2)

-

211


Exchange translation differences

(61)

252

(20)

171

44

(669)


At end of period

634

(4,149)

265

(3,250)

(3,752)









Net borrowings comprise cash and cash equivalents, loan capital, finance leases, promissory notes, bank and other loans, and those derivative financial instruments used to hedge the fair value of fixed rate borrowings.



6    Adjusted figures

 

Reed Elsevier uses adjusted figures as key performance measures. Adjusted figures are stated before amortisation of acquired intangible assets, exceptional restructuring and acquisition integration costs, disposal gains and losses and other non operating items, related tax effects and movements in deferred taxation assets and liabilities that are not expected to crystallise in the near term. Adjusted operating profits are also grossed up to exclude the equity share of taxes in joint ventures. Exceptional restructuring costs relate to the major restructuring programme announced in February 2008. Adjusted operating cash flow is measured after dividends from joint ventures and net capital expenditure but before payments in relation to exceptional restructuring and acquisition integration costs. Adjusted figures are derived as follows:

Continuing operations






£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




797

1,163


Operating profit - continuing operations

401

371


517

549




Adjustments:






194

283


Amortisation of acquired intangible assets

105

95


135

141

-

-


Exceptional restructuring costs

39

-


50

-

17

25


Acquisition integration costs

6

5


8

7

8

12


Reclassification of tax in joint ventures

6

4


8

6

1,016

1,483


Adjusted operating profit from continuing operations

557

475


718

703










720

1,051


Profit before tax - continuing operations

350

308


451

455




Adjustments:






194

283


Amortisation of acquired intangible assets

105

95


135

141

-

-


Exceptional restructuring costs

39

-


50

-

17

25


Acquisition integration costs

6

5


8

7

8

12


Reclassification of tax in joint ventures

6

4


8

6

(62)

(91)


Disposals and other non operating items

(16)

(7)


(20)

(10)

877

1,280


Adjusted profit before tax from continuing operations

490

405


632

599










1,200

1,709


Profit attributable to parent companies' shareholders

309

311


383

464

(374)

(503)


Net profit from discontinued operations

(36)

(80)


(31)

(122)


826


1,206


Profit attributable to parent companies' shareholders - continuing operations

273

231



352

342




Adjustments (post tax):






222

324


Amortisation of acquired intangible assets

119

109


153

162

-

-


Exceptional restructuring costs

27

-


35

-

11

16


Acquisition integration costs

4

3


5

4

(289)

(421)


Disposals and other non operating items

(15)

(7)


(19)

(10)




Deferred tax not expected to crystallise in the 
near term:







(21)


(31)


Unrealised exchange differences on long term inter affiliate lending


-


2



-


3

(58)

(85)


Acquired intangible assets

(30)

(29)


(39)

(43)

(15)

(22)


Other

-

3


-

4


676


987


Adjusted profit attributable to parent companies' shareholders from continuing operations


378


312



487


462










1,066

1,556


Cash generated from operations

544

466


702

689

12

18


Dividends received from joint ventures

13

10


17

15

(52)

(76)


Purchases of property, plant and equipment

(13)

(19)


(17)

(28)

3

5


Proceeds from disposals of property, plant and equipment

1

-


1

-

(71)

(104)


Expenditure on internally developed intangible assets

(43)

(37)


(55)

(55)

-

-


Payments relating to exceptional restructuring costs

14

-


18

-

16

23


Payments relating to acquisition integration costs

7

6


9

9

974

1,422


Adjusted operating cash flow from continuing operations

523

426


675

630



Total operations







£



Year ended 31 December



Six months ended 30 June


Six months ended 30 June

2007

£m

2007

€m



2008

£m

2007

£m


2008

€m

2007

€m




797

1,163


Operating profit - continuing operations

401

371


517

549

203

297


Operating profit - discontinued operations

47

19


61

28

1,000

1,460


Operating profit - total operations

448

390


578

577




Adjustments:






230

336


Amortisation of acquired intangible assets

109

118


140

175

­-

-


Exceptional restructuring costs

46

-


59

-

20

29


Acquisition integration costs

10

6


13

8

8

12


Reclassification of tax in joint ventures

6

4


8

6

1,258

1,837


Adjusted operating profit from total operations

619

518


798

766










720

1,051


Profit before tax - continuing operations

350

308


451

455

203

297


Profit before tax - discontinued operations

47

19


61

28

923

1,348


Profit before tax - total operations

397

327


512

483




Adjustments:






230

336


Amortisation of acquired intangible assets

109

118


140

175

-

-


Exceptional restructuring costs

46

-


59

-

20

29


Acquisition integration costs

10

6


13

8

8

12


Reclassification of tax in joint ventures

6

4


8

6

(62)

(91)


Disposals and other non operating items

(16)

(7)


(20)

(10)

1,119

1,634


Adjusted profit before tax from total operations

552

448


712

662











1,200


1,709


Profit attributable to parent companies' shareholders - total operations


309


311



383


464




Adjustments (post tax):






259

378


Amortisation of acquired intangible assets

126

133


163

197

-

-


Exceptional restructuring costs

32

-


41

-

13

19


Acquisition integration costs

8

4


10

5

(521)

(717)


Disposals and other non operating items

(23)

(79)


(14)

(120)




Deferred tax not expected to crystallise in the near term:






(21)

(31)


Unrealised exchange differences on long term inter affiliate lending

-

2


-

3

(63)

(92)


Acquired intangible assets

(31)

(34)


(40)

(50)

(15)

(22)


Other

-

3


-

4

852

1,244


Adjusted profit attributable to parent companies' shareholders from total operations

421

340


543

503











  7    Acquisition of ChoicePoint, Inc.

 

On 20 February 2008, Reed Elsevier entered into a definitive merger agreement with ChoicePoint, Inc. to acquire the company for cash.  After taking into account ChoicePoint's net debt as at 31 December 2007 of $0.6bn, the total value of the transaction is $4.1bn.


The merger is subject to customary regulatory approvals and is expected to be completed later in the year. The transaction will be financed initially through committed new bank facilities, to be later refinanced through the issuance of term debt. 


8    Exchange translation rates

 

In preparing the combined financial information the following exchange rates have been applied:


Year ended 
31 December 2007



Income statement


Balance sheet

Income statement

Balance sheet



30 June 2008

30 June 2007


30 June 2008

30 June 2007













1.46

1.36


Euro to sterling

1.29

1.48


1.26

1.49

2.00

2.00


US dollars to sterling

1.97

1.97


2.00

2.00

1.37

1.47


US dollars to euro

1.53

1.33


1.59

1.34











 

Reed Elsevier PLC
Summary financial information

Basis of preparation

The Reed Elsevier PLC share of the Reed Elsevier combined results has been calculated on the basis of the 52.9% economic interest of the Reed Elsevier PLC shareholders in the Reed Elsevier combined businesses, after taking account of the results arising in Reed Elsevier PLC and its subsidiary undertakings. The summary financial information, presented in condensed form, has been prepared in accordance with IAS34 - Interim Financial Reporting and on the basis of the group accounting policies of Reed Elsevier PLC as set out on page 154 of the Reed Elsevier Annual Reports and Financial Statements 2007, which are in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and as issued by the International Accounting Standards Board. Reed Elsevier PLC's 52.9% economic interest in the net assets of the combined businesses is shown in the balance sheet as investments in joint ventures, net of the assets and liabilities reported as part of Reed Elsevier PLC and its subsidiary undertakings.
The summary financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The interim figures for the six months ended 30 June 2008 and the comparative amounts to 30 June 2007 are unaudited but have been reviewed by the auditors. The summary financial information for the year ended 31 December 2007 has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2007, which have been filed with the UK Registrar of Companies and received an unqualified audit report.


 

Consolidated income statement

For the six months ended 30 June 2008






£

Year ended 31 December



Six months ended 30 June

2007

£m



2008

£m

2007

£m



(1)


Administrative expenses

-

-

(11)


Effect of tax credit equalisation on distributed earnings

(8)

(8)

658


Share of results of joint ventures

169

174

646


Operating profit

161

166

(3)


Finance charges

-

(1)

643


Profit before tax

161

165

(19)


Taxation

(6)

 (8)

624


Profit attributable to ordinary shareholders

155

157











Earnings per ordinary share

For the six months ended 30 June 2008






£

Year ended 31 December



Six months ended 30 June

2007

pence



2008

pence

2007

pence





Basic earnings per share



33.9p


From continuing operations of the combined businesses

12.4p

9.1p

15.8p


From discontinued operations of the combined businesses

1.7p

3.4p

49.7p


From total operations of the combined businesses

14.1p

12.5p



Diluted earnings per share



33.5p


From continuing operations of the combined businesses

12.3p

9.0p

15.6p


From discontinued operations of the combined businesses

1.7p

3.3p

49.1p


From total operations of the combined businesses

14.0p

12.3p






Adjusted profit and earnings per share figures are presented in note 1 as additional performance measures.




Consolidated cash flow statement

For the six months ended 30 June 2008






£

Year ended 31 December



Six months ended 30 June

2007

£m



2008

£m

2007

£m





Cash flows from operating activities



(2)


Cash used by operations

-

-

(3)


Interest received/(paid)

1

1

(16)


Tax paid

(8)

(5)

(21)


Net cash used in operating activities

(7)

(4)








Cash flows from investing activities



850


Dividends received from joint ventures

-

400








Cash flows from financing activities



(206)


Equity dividends paid

(1,187)

(149)

92


Proceeds on issue of ordinary shares

25

79

(92)


Purchase of treasury shares

(20)

(14)

(36)


Repayment of loan from joint ventures

-

-

(587)


Decrease/(increase) in net funding balances due from joint ventures

1,189

(312)

(829)


Net cash from/(used in) financing activities

7

(396)






-


Movement in cash and cash equivalents

-

-











 

Consolidated balance sheet

As at 30 June 2008






£

As at

 31 December



As at 30 June

2007

£m



2008

£m

2007

£m





Non-current assets



1,584


Investments in joint ventures

501

1,295

1,584


Total assets

501

1,295



Current liabilities



-


Amounts owed to joint ventures

-

36

-


Payables

2

1

16


Taxation

14

16

16


Total liabilities

16

53

1,568


Net assets

485

1,242



Capital and reserves



163


Called up share capital

164

163

1,123


Share premium account

1,147

1,110

(302)


Shares held in treasury (including in joint ventures)

(347)

(232)

4


Capital redemption reserve

4

4

(37)


Translation reserve

(7)

(119)

617


Other reserves

(476)

316

1,568


Total equity

485

1,242






Approved by the Board of Directors, 30 July 2008.



Consolidated statement of recognised income and expense

For the six months ended 30 June 2008






£

Year ended 31 December



Six months ended 30 June

2007

£m



2008

£m

2007

£m



624


Profit attributable to ordinary shareholders

155

157

77


Share of joint ventures' net (expense)/income recognised directly in equity

(34)

138

78


Share of joint ventures' cumulative exchange differences on disposal of foreign operations

14

1


(4)


Share of joint ventures' cumulative fair value movements on disposal of available for sale investments

-


(1)

(11)


Share of joint ventures' transfer to net profit from hedge reserve

(5)

(5)

764


Total recognised net income and expense for the period

130

290











 

Consolidated reconciliation of shareholders' equity

For the six months ended 30 June 2008






£

Year ended 31 December



Six months ended 30 June

2007

£m



2008

£m

2007

£m



764


Total recognised net income for the period

130

290

(206)


Equity dividends declared

(1,187)

(149)

92


Issue of ordinary shares, net of expenses

25

79

(130)


Increase in shares held in treasury (including in joint ventures)

(49)

(32)

24


Increase in share based remuneration reserve

12

11

(16)


Equalisation adjustments

(14)

3

528


Net (decrease)/increase in shareholders' equity

(1,083)

202

1,040


Shareholders' equity at start of period

1,568

1,040

1,568


Shareholders' equity at end of period

485

1,242







 

Reed Elsevier NV
Summary financial information


Basis of preparation

The Reed Elsevier PLC share of the Reed Elsevier combined results has been calculated on the basis of the 52.9% economic interest of the Reed Elsevier PLC shareholders in the Reed Elsevier combined businesses, after taking account of the results arising in Reed Elsevier PLC and its subsidiary undertakings. The summary financial information, presented in condensed form, has been prepared in accordance with IAS34 - Interim Financial Reporting and on the basis of the group accounting policies of Reed Elsevier PLC as set out on page 154 of the Reed Elsevier Annual Reports and Financial Statements 2007, which are in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and as issued by the International Accounting Standards Board. Reed Elsevier PLC's 52.9% economic interest in the net assets of the combined businesses is shown in the balance sheet as investments in joint ventures, net of the assets and liabilities reported as part of Reed Elsevier PLC and its subsidiary undertakings.
The summary financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The interim figures for the six months ended 30 June 2008 and the comparative amounts to 30 June 2007 are unaudited but have been reviewed by the auditors. The summary financial information for the year ended 31 December 2007 has been abridged from the Reed Elsevier Annual Reports and Financial Statements 2007, which have been filed with the UK Registrar of Companies and received an unqualified audit report.


Consolidated income statement

For the six months ended 30 June 2008






Year ended

 31 December



Six months ended 30 June

2007

€m



2008

€m

2007

€m



(3)


Administrative expenses

(1)

(1)

803


Share of results of joint ventures

164

211

800


Operating profit

163

210

73


Finance income

38

29

873


Profit before tax

201

239

(18)


Taxation

(9)

(7)

855


Profit attributable to ordinary shareholders

192

232











 

Earnings per ordinary share

For the six months ended 30 June 2008






Year ended

31 December



Six months ended 30 June

2007



2008

2007





Basic earnings per share



€0.78


From continuing operations of the combined businesses

€0.26

€0.22

€0.32


From discontinued operations of the combined businesses

€0.02

€0.08

€1.10


From total operations of the combined businesses

€0.28

€0.30



Diluted earnings per share



0.77


From continuing operations of the combined businesses

From discontinued operations of the combined businesses

0.26

0.02

0.22

0.32


0.07

€1.09


From total operations of the combined businesses

0.28

€0.29


Adjusted profit and earnings per share figures are presented in note 1 as additional performance measures.



Consolidated cash flow statement

For the six months ended 30 June 2008






Year ended

 31 December



Six months ended 30 June

2007

€m



2008

€m

2007

€m





Cash flows from operating activities



(2)


Cash used by operations

-

(1)

71


Interest received

39

28

(18)


Tax paid

(3)

(1)

51


Net cash from operating activities

36

26








Cash flows from investing activities



1,410


Dividends received from joint ventures

1,200

750








Cash flows from financing activities



(310)


Equity dividends paid

(1,497)

(225)

124


Proceeds on issue of ordinary shares

26

113

(176)


Purchase of treasury shares

(25)

(20)

(1,238)


Decrease/(increase) in net funding balances due from joint ventures

252

(735)

(1,600)


Net cash used in financing activities

(1,244)

(867)






(139)


Movement in cash and cash equivalents

(8)

(91)











 

Consolidated balance sheet

As at 30 June 2008






As at

 31 December



As at 30 June

2007

€m



2008

€m

2007

€m





Non-current assets



2,075


Investments in joint ventures

652

1,766



Current assets



5


Amounts due from joint ventures - other 

4

4

9


Cash and cash equivalents

1

57

14



5

61

2,089


Total assets

657

1,827



Current liabilities



9


Payables

10

8

64


Taxation

70

70

73


Total liabilities

80

78

2,016


Net assets

577

1,749



Capital and reserves



49


Share capital issued

49

48

1,685


Paid-in surplus

1,711

1,675

(459)


Shares held in treasury (including in joint ventures)

(503)

(327)

(159)


Translation reserve

(196)

(99)

900


Other reserves

(484)

452

2,016


Total equity

577

1,749






Approved by the Combined Board of Directors, 30 July 2008.

 

Consolidated statement of recognised income and expense

For the six months ended 30 June 2008






Year ended

 31 December



Six months ended 30 June

2007

€m



2008

€m

2007

€m



855


Profit attributable to ordinary shareholders

192

232

(45)


Share of joint ventures' net (expense)/income recognised directly in equity

(114)

195

103


Share of joint ventures' cumulative exchange differences on disposal of foreign operations

27

-

(5)


Share of joint ventures' cumulative fair value movements on disposal of available for sale investments

-

-

(15)


Share of joint ventures' transfer to net profit from hedge reserve

(6)

(8)

893


Total recognised net income and expense for the period

99

419











 

Consolidated reconciliation of shareholders' equity

For the six months ended 30 June 2008






Year ended

 31 December



Six months ended 30 June

2007

€m



2008

€m

2007
€m

893


Total recognised net income for the period

99

419

(310)


Equity dividends declared

(1,497)

(225)

124


Issue of ordinary shares, net of expenses

26

113

(230)


Increase in shares held in treasury (including in joint ventures)

(60)

(45)

34


Increase in share based remuneration reserve

14

16

40


Equalisation adjustments

(21)

6

551


Net (decrease)/increase in shareholders' equity

(1,439)

284

1,465


Shareholders' equity at start of period

2,016

1,465

2,016


Shareholders' equity at end of period

577

1,749












Notes to the summary financial information

1    Adjusted figures

 

Adjusted profit and earnings per share figures are used as additional performance measures. Adjusted earnings per share is based upon the Reed Elsevier NV shareholders' 50% economic interest in the adjusted profit attributable of the Reed Elsevier combined businesses, which is reconciled to the reported figures in note 6 to the combined financial information. The adjusted figures are derived as follows:


Earnings per share from total operations of the combined businesses









Year ended 31 December



Six months ended 30 June

Profit attributable to ordinary shareholders

Basic earnings per share



Profit attributable to ordinary shareholders

Basic earnings

per share

2007

€m

2007



2008

€m

2007

€m

2008

2007

855

€1.10


Reported figures 

192

232

0.28

€0.30

(233)

€(0.30)


Share of adjustments in joint ventures

80

20

0.12

€0.02

622

€0.80


Adjusted figures

272

252

0.40

€0.32









 

Earnings per share from continuing operations of the combined businesses









Year ended 31 December



Six months ended 30 June

Profit attributable to ordinary shareholders

Basic earnings per share



Profit attributable to ordinary shareholders

Basic earnings

per share

2007

m

2007



2008

m

2007

m

2008

2007

855

1.10


Reported figures 

192

232

€0.28

0.30


(252)


(0.32)


Share of joint ventures' net profit from discontinued operations


(16)


(61)


€(0.02)


(0.08)

603

0.78


Profit attributable to ordinary shareholders based 
on the continuing operations of the combined businesses

176

171

€0.26

0.22









 

2    Dividends and share consolidation

 

On 18 January 2008, the company paid a special distribution of €1.767 per ordinary share from the net proceeds of the disposal of Harcourt Education. The distribution of €1,299m was recognised when paid.


The special distribution was accompanied by a consolidation of ordinary share capital on the basis of 58 new ordinary shares of €0.07 for every 67 existing ordinary shares of €0.06, being the ratio of the aggregate special distribution (including that paid by Reed Elsevier PLC) to the combined market capitalisation of Reed Elsevier NV (excluding the 5.8% indirect equity interest in Reed Elsevier NV held by Reed Elsevier PLC) and Reed Elsevier PLC as at 12 December 2007, the date of the announcement of the special distribution. The existing R-shares of €0.60 were consolidated on a similar basis into new R-shares of €0.70. 


During the six months ended 30 June 2008, the final 2007 dividend of €0.311 per ordinary share was paid, at a cost of €198m (2007: final 2006 dividend €0.304 per ordinary share; €225m). On 30 July 2008 an interim dividend of €0.114 per ordinary share (2007: interim 2007 dividend €0.114 per ordinary share) was declared by the Boards of Reed Elsevier NV. The 2008 interim dividend will be paid on the ordinary shares on 29 August 2008, with ex-dividend and record dates of 6 August 2008 and 8 August 2008 respectively. The cost of this dividend of €71m (2007 interim: €85m) will be recognised when paid. 


 3    Share capital and treasury shares


Year ended

 31 December




Treasury shares

millions

Six months ended 30 June

2007



Shares in issue

milions

2008

2007

Shares in issue net of treasury shares millions



Shares in issue net of treasury shares

millions

Shares in issue net of treasury shares millions



Number of ordinary shares





726.0


At start of period

760.3

(35.4)

724.9

726.0

-


Share consolidation

(102.1)

4.7

(97.4)

-

11.7


Issue of ordinary shares

2.4

-

2.4

10.6

(11.9)


Share repurchases

-

(2.1)

(2.1)

(1.6)

(0.9)


Net (purchase)/release of shares by employee benefit trust

-

(2.4)

(2.4)

1.3

724.9


At end of period

660.6

(35.2)

625.4

736.3

774.9


Average number of equivalent ordinary shares during the period



674.2

776.7








The average number of equivalent ordinary shares takes into account the 'R' shares in the company held by a subsidiary of Reed Elsevier PLC, which represents a 5.8% interest in the company's share capital.


4    Contingent liabilities

 

There are contingent liabilities in respect of borrowings of joint ventures guaranteed jointly and severally by Reed Elsevier NV and Reed Elsevier PLC amounting to €3,610m at 30 June 2008 (31 December 2007: €3,745m).


5    Acquisition of ChoicePoint, Inc.

 

On 20 February 2008, Reed Elsevier entered into a definitive merger agreement with ChoicePoint, Inc. to acquire the company for cash.  After taking into account ChoicePoint's net debt as at 31 December 2007 of $0.6bn, the total value of the transaction is $4.1bn.


The merger is subject to customary regulatory approvals and is expected to be completed later in the year. The transaction will be financed initially through committed new bank facilities, to be later refinanced through the issuance of term debt.


Additional information for US investors


Summary financial information in US dollars

 

This summary financial information in US dollars is a simple translation of the Reed Elsevier combined financial information into US dollars at the rates of exchange set out in note 8 to the combined financial information. The financial information provided below is prepared in accordance with accounting principles as used in the preparation of the Reed Elsevier combined financial information. It does not represent a restatement under US Generally Accepted Accounting Principles ('US GAAP'), which would be different in some significant respects.


Combined income statement






$

Year ended

 31 December



Six months ended 30 June

2007

US$m



2008

US$m

2007

US$m



7,356


Revenue - continuing operations

3,881

3,526

1,594


Operating profit - continuing operations

790

731

1,440


Profit before tax - continuing operations

690

607

748


Net profit from discontinued operations

71

158

2,400


Net profit attributable to parent companies' shareholders - total operations

609

613

2,032


Adjusted operating profit - continuing operations

1,097

936

1,704


Adjusted profit attributable to parent companies' shareholders - total operations

829

670

US$


Basic earnings per American Depositary Share (ADS) - total operations

US$

US$

$3.98


Reed Elsevier PLC (Each ADS comprises four ordinary shares)

$1.11

$0.99

$3.01


Reed Elsevier NV (Each ADS comprises two ordinary shares)

$0.86

$0.80



Adjusted earnings per American Depositary Share (ADS) - total operations



$2.87


Reed Elsevier PLC (Each ADS comprises four ordinary shares)

$1.60

$1.13

$2.19


Reed Elsevier NV (Each ADS comprises two ordinary shares)

$1.22

$0.85






Adjusted earnings per American Depository Share is based on Reed Elsevier PLC shareholders' 52.9% and Reed Elsevier NV shareholders' 50% respective share of the adjusted profit attributable of the Reed Elsevier combined businesses. Adjusted figures are presented as additional performance measures and are reconciled to the reported figures at their sterling and euro amounts in note 6 to the combined financial information and in note 1 to the summary financial information of each of the two parent companies.


Combined cash flow statement






$

Year ended

 31 December



Six months ended 30 June

2007

US$m



2008

US$m

2007

US$m



1,412


Net cash from operating activities - continuing operations

794

573

(610)


Net cash used in investing activities - continuing operations

(290)

(496)

(896)


Net cash (used in)/from financing activities - continuing operations

(4,460)

157

3,928


Net cash from/(used in) discontinued operations

8

(130)

3,834


(Decrease)/increase in cash and cash equivalents

(3,948)

104

1,948


Adjusted operating cash flow - continuing operations

1,030

839









Combined balance sheet






$

As at

 31 December



As at 30 June

2007

US$m



2008

US$m

2007

US$m



10,682


Non-current assets

9,614

10,622

8,192


Current assets

3,592

3,648

682


Assets held for sale

1,634

3,170

19,556


Total assets

14,840

17,440

7,734


Current liabilities

6,398

5,952

5,702


Non-current liabilities

5,768

6,130

168


Liabilities associated with assets held for sale

822

638

13,604


Total liabilities

12,988

12,720

5,952


Net assets

1,852

4,720







Directors' responsibility statement


The directors confirm that to the best of their knowledge the condensed combined financial information and respective condensed parent company financial information have been prepared in accordance with IAS34 Interim Financial Reporting as adopted by the European Union and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7 and 4.2.8.


At the date of this statement, the directors of Reed Elsevier PLC and Reed Elsevier NV are those listed in the Reed Elsevier Annual Reports and Financial Statements 2007 with the exception of Rolf Stomberg, who retired in April 2008.




By order of the Board of Reed Elsevier PLC

30 July 2008


By order of the Combined Board of Reed Elsevier NV

30 July 2008






J Hommen       M H Armour

Chairman      Chief Financial Officer



J Hommen      M H Armour

Chairman      Chief Financial Officer




Independent review report to Reed Elsevier PLC and Reed Elsevier NV


Introduction

 

We have been instructed by the boards of Reed Elsevier PLC and Reed Elsevier NV to review the combined financial information, presented in condensed form, of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier Group plc and Elsevier Reed Finance BV and their respective subsidiaries, associates and joint ventures (together 'the combined businesses') for the six months ended 30 June 2008 which comprises the combined income statement, combined cash flow statement, combined balance sheet, combined statement of recognised income and expense, combined reconciliation of shareholders' equity and related notes 1 to 8


We have also reviewed the summary financial information, presented in condensed form, of Reed Elsevier PLC and Reed Elsevier NV for the six months ended 30 June 2008 which comprise, respectively, the consolidated income statement, consolidated cash flow statement, consolidated balance sheet, consolidated statement of recognised income and expense, consolidated reconciliation of shareholders' equity and the related notes 1 to 5. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.


This report is made solely to Reed Elsevier PLC and Reed Elsevier NV in accordance with International Standard on Review Engagements (United Kingdom and Ireland) 2410 as issued by the United Kingdom Auditing Practices Board, and Dutch Law. Our review work has been undertaken so that we might state to Reed Elsevier PLC and Reed Elsevier NV those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by applicable law, we do not accept or assume responsibility to anyone other than Reed Elsevier PLC and Reed Elsevier NV for our review work, for this report, or for the conclusions we have formed.


Directors' responsibilities

 

The Reed Elsevier Interim Statement, including the financial information contained therein, is the responsibility of, and has been approved by, the directors of Reed Elsevier PLC and Reed Elsevier NV. The directors of Reed Elsevier PLC and Reed Elsevier NV are responsible for preparing the Reed Elsevier Interim Statement in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. The annual financial statements of Reed Elsevier PLC and Reed Elsevier NV are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The attached financial information has been prepared in accordance with International Accounting Standard 34: 'Interim Financial Reporting' as adopted by the European Union. 


Our responsibility

 

Our responsibility is to express to Reed Elsevier PLC and Reed Elsevier NV a conclusion on the accompanying financial information based on our review. 


Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (United Kingdom and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' as issued by the United Kingdom Auditing Practices Board, and Dutch Law. A review of interim financial information consists principally of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit performed in accordance with International Standards on Auditing and International Standards on Auditing (United Kingdom and Ireland), and Dutch Law, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


Review conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34: 'Interim Financial Reporting' as adopted in the European Union and the Transparency and Disclosure Rules of the United Kingdom's Financial Services Authority.



Deloitte & Touche LLP                                               Deloitte Accountants BV

Chartered Accountants and Registered Auditor    JPM Hopmans

London                                                                          Amsterdam

United Kingdom                                                           The Netherlands

30 July 2008                                                                  30 July 2008

 

 

Investor information

 
Financial calendar


2008





31 July


PLC

NV


Announcement of interim results for the six months to 30 June 2008

6 August



PLC

NV


Ex-dividend date - 2008 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares and ADRs

8 August



PLC

NV


Record date - 2008 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares and ADRs

29 August


PLC

NV


Payment date - 2008 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares

5 September


PLC

NV


Payment date - 2008 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs

13 November


PLC

NV


Interim management statement issued in relation to the 2008 financial year






2009





19 February


PLC

NV


Announcement of Preliminary Results for the year to 31 December 2008

21 April    


PLC


Annual General Meeting - Reed Elsevier PLC, London

22 April


NV    


Annual General Meeting - Reed Elsevier NVAmsterdam

30 July


PLC

NV


Announcement of interim results for the six months to 30 June 2009











Listings

Reed Elsevier PLC 

Reed Elsevier NV 



London Stock Exchange

Euronext Amsterdam

Ordinary shares (REL) - ISIN No. GB00B2B0DG97

Ordinary shares (REN) - ISIN No. NL0006144495



New York Stock Exchange

New York Stock Exchange

American Depositary Shares (RUK) - CUSIP No. 758205207

American Depositary Shares (ENL) - CUSIP No. 758204200

Each ADR represents four ordinary shares

Each ADR represents two ordinary shares



Investor information

 

Contacts

Reed Elsevier PLC

1-3 Strand

London WC2N 5JR

United Kingdom

Tel:    +44 (0) 20 7930 7077

Fax:    +44 (0) 20 7166 5799


Reed Elsevier NV

Radarweg 29

1043 NX Amsterdam

The Netherlands

Tel:    +31 (0) 20 485 2222

Fax:    +31 (0) 20 618 0325


Reed Elsevier PLC and Reed Elsevier NV 

ADR Depositary

The Bank of New York Mellon

Shareholder Services

PO Box 358516

PittsburghPA 15252-8516

USA

Tel:    +1 888 269 2377

           +1 201 680 6825 (outside the US)

email: [email protected]

www.adrbny.com




Auditors

Deloitte & Touche LLP

2 New Street Square

London EC4A 3BT

United Kingdom


Deloitte Accountants B.V.

Orlyplein 50

1043 DP Amsterdam

The Netherlands 





Stockbrokers 

JP Morgan Cazenove Limited

20 Moorgate

London EC2R 6DA

United Kingdom


UBS Investment Bank

1 Finsbury Avenue

London EC2M 2PP

United Kingdom


ABN AMRO Bank NV

Gustav Mahlerlaan 10

1082 PP Amsterdam

The Netherlands

Reed Elsevier PLC Registrar

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

United Kingdom

Tel:    0871 384 2960 (calls charged at 8p per     minute from a BT landline, other telephony     providers costs may vary)

    +44 121 415 7047 (non-UK callers)

www.shareview.co.uk

For further investor information visit: 

www.reedelsevier.com

This announcement is available on the Reed Elsevier website. Copies are available to the public from the registered offices of the respective companies shown above.




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