Reed Elsevier Reports First Half

It all seems to be coming good for Reed - other than the Educational market that is. Reed released their mid term results this week and they are quite good. (McGraw Hill also seems to be having a good year and Pearson is to report on July 31th). Revenues are up 8% and profit is up 14%. While they are not over exuberant about the full year, it would seem they are in a strong place to exceed their full year budget. Here is their presentation.

Their first half was expected to be stronger but they haven't down played the full year results. Sir Crispin:

"The first half of 2006 has seen a good financial performance and further
encouraging progress in the development of our business in an increasingly
digital environment. Trusted information, technology enabled, and increasingly
integrated into customer workflows, is making our customers more effective
professionally and making Reed Elsevier a more valued partner. The first half
financial performance provides a good platform to meet our 2006 financial
goals."

Organic growth is 1% greater than their budget at 6% over the first half last year and their adjusted EPS is up 16% versus their budgeted expectation of 10%. The EPS number has been due to more favorable tax payments and better performance in Exhibitions versus last year. They are however cautious and expect some of this to reverse in the second half.

All their business segments performed with strength with the exception of Harcourt which had much lower operating profits than expected. Management suggests that the second half is far stronger for revenues and profit - although they would have budgeted that way. Operating margin was down more than 1ppt versus last year while revenues were actually higher. Management is also saying that operational issues are being addressed.

Reed also mentioned that they may speed up and add to the share repurchase plan thay have in place. (Incidentally McGraw Hill also have a similar repurchase effort underway). Reed have also built up an employee share benefit plan. The divisional results were summarized as follows:

• Elsevier: Good subscription renewals and growing online sales
• LexisNexis: Strong growth in legal digital solutions, risk and international
• Harcourt Education: Encouraging success in US textbook adoptions; supplemental building; assessment underperformed
• Reed Business: Strong growth in online and Exhibitions; benefit from biennial show cycling
• Phasing of business this year benefits first half growth
• On track to meet 2006 financial targets
• Reed Elsevier PLC and Reed Elsevier NV dividend up 11%; total of £288m/€420m shares repurchase