Friday, February 20, 2009

Swan Song for Sir Crispin

Reed Elsevier presented a robust end to 2008 with the presentation of their end of year numbers yesterday. In constant currencies, RE revenues were up 7% over 2007 and operating income was up 12%. Underlying results were slightly less at 4% and 9% respectively.

Reed Elsevier revenues finished the year at £5.3billion and earning per share were up 15% in constant currencies and the press release points out this is their highest growth in 10 yrs. As expected Elsevier, Lexis and Exhibitions all drove revenue and operating income growth and while Reed Business Information was the laggard the business hardly fell off a cliff during 2008.

From the press release:

“Reed Elsevier has had a very successful year with major progress in developing the business, and the strongest constant currency adjusted eps growth in a decade. Good revenue growth was seen across most of the business driven by the growing demand for online information and workflow solutions. The revenue growth and a strong focus on restructuring and cost management delivered meaningful margin improvement and the operating cash generation was excellent. Whilst the economic environment has become progressively more challenging, our business is more resilient than most and we are in a strong financial position.
The year saw demonstrable progress across the business from our continued investment in new content and online product development. In Elsevier, subscription renewals reached record levels whilst other online solutions for the scientific and healthcare communities grew rapidly. Online legal information solutions have continued to expand, and there is growing demand for information analytics in the risk market. In legal research we see significant opportunities for more intuitive and interoperable offerings to enhance customer productivity and are stepping up our investment to reflect this. Reed Exhibitions had an exceptional year including the benefit of non annual shows cycling in. Reed Business Information held up well for most of the year, helped by the strong growth of its significant online franchises. In the last quarter, however, the business increasingly felt the impact on advertising markets of the global downturn.

The year has also seen a major reshaping of our business with completion of the sale of the remaining Harcourt Education businesses and the acquisition of ChoicePoint. ChoicePoint transforms our position in the risk information and analytics sector and the strategic and financial benefits are very attractive. The business has performed well with the insurance data and services business, which accounts for the substantial majority of ChoicePoint’s operating profits, delivering 10% year-on-year organic revenue growth. The integration with our existing risk business is progressing well and we are confident of achieving our savings and returns targets. We were disappointed not to be able to sell Reed Business Information but the macro-economic environment and poor credit market conditions made it too difficult to structure a transaction on acceptable terms. Whilst the short term outlook for RBI is very challenging, RBI is a high quality business, with a strong management team and a record of success in developing online services. It remains our intention to divest RBI in the medium term when conditions are more favourable.
Buried in the report was also the expected news that RE have reduced what was a $300mm (€230mm) investment in Harcourt parent Education Media and Publishing Group (EMPG) to just €15m. The equity stake that RE was forced to take in Harcourt when the business was sold represented just less than 12%. Companies do use their own judgment (there are FASB rules) when re-evaluating the value of third party investments like this one however, this action isn't likely to impress the bankers who lent $7Billion to EMPG for their acquisition spree.

Management Powerpoint Presentation

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