Monday, August 01, 2011

MediaWeek (V4, N31): Financial resutls: Pearson, Wiley, Wolters Kluwer, Reed Elsevier

From Pearson's press release: Pearson sales up 6% to £2.4bn and profits up 20% to £208m* (Pearson)
Education sales up 9% and profits up 31%:
  • Good sales growth in International (up 26%) and Professional (up 35%).
  • In North America, sales 3% lower with tough first-half comparables; full-year growth expected with easing H2 comparables and further market share gains.
  • FT Group sales up 7% and profits up 10%, enhanced by digital subscriptions.
  • Penguin sales 4% lower (underlying sales level); profits sustained with rapid digital growth.

    Strong growth in digital, developing markets and newly-acquired businesses

  • Education digital platform and service registrations up 15%;
  • subscriptions up more than 30%;
  • Penguin ebook revenues up almost 130%.Sales up approximately 40% in developing markets (headline growth).
  • Strong growth from recent acquisitions including Wall Street Institute, SEB (Brazil), TutorVista, CTI (South Africa) and Melorio (now known as Pearson in Practice).

    Full year outlook upgraded

  • Pearson expects sales and margin growth for the full year, based on good trading momentum - especially in digital businesses and developing markets - and easing comparatives.Pearson expects to achieve adjusted EPS of approximately 80p for the full year (2010: 77.5p). This guidance is struck at current exchange rates (£1: $1.63).


    In Education, we expect continued growth in 2011. While we face tougher comparatives in International and Professional in the second half of the year, we expect our North American Education business to report full-year growth based on business won in the year to date and less challenging comparables in the second half. Our education business faces continued pressure from state budget weakness and slower enrolment rates in North America, and a generally weak public spending environment in many developed parts of the world. We are confident that rapid growth in our digital and services businesses – which help boost student performance and institutional efficiency - and in emerging economies can continue.Penguin is working through a period of significant industry change characterised by a rapid shift towards digital sales channels and digital books and intense pressure on physical book retailers, demonstrated most recently by the bankruptcy of Borders in the US.

    Penguin has performed well through these industry changes and, after a particularly strong competitive performance and financial results in 2010, we expect it to perform in line with the overall consumer publishing industry this year.
From June, John Wiley & Sons Announces Fiscal Year and Fourth Quarter Results (Wiley)
Full Year Revenue up 4% excluding FX (+3% including FX) Adjusted EPS growth of 15% excluding FX, the $0.10 third quarter charge related to Borders, and $0.17 impairment and restructuring charges related to GIT last year.

U.S. GAAP EPS growth of 16% including FX (+19% excluding FX)Free cash flow (FCF) increased 25% to $270 million.
Net debt (long term debt less cash and cash equivalents) reduced by $243 million during the year to $252 million.

Fourth Quarter Revenue down 0.5% excluding foreign exchange (up +2% including FX)
Revenue growth by segment excluding FX: STMS flat, P/T -4%, HE +6% Reported EPS flat over prior year including FX (-5% excluding FX) FY12 Outlook Expect FX neutral outlook of mid-single-digit revenue growth and EPS in a range from ($3.15 to $3.20)

Operations Results:


  • Fourth quarter revenue flat excluding FX, +4% full year
  • Fourth quarter contribution to profit down 0.8%, +5% full year, excluding FX and prior year restructuring and impairment charges
  • Calendar year 2011 journal subscription receipts showing approximately 3% growth with 95% of targeted full year business closed at April 30, 2011, as expected.
  • Full year 2011 digital revenue at 59% of total STMS revenue
  • Full year 2011 digital book revenue up 74% and now accounts for 16% of total book sales

STMS revenue for the quarter was up 3% to $287 million, or essentially flat excluding foreign exchange. The soft performance for the quarter was as expected as a result of approximately $10 million of accelerated billings reported in Wiley’s third quarter. Due to improved processes for journal subscription licensing implemented for calendar year 2011, revenue for published journals was accelerated into the third quarter of fiscal year 2011. Excluding the timing issue, new journal subscriptions and new society business, backfile sales and eBook revenue drove the results for the quarter.

Direct contribution to profit for the quarter grew 2% to $131 million, or fell 1% excluding foreign exchange and a prior year $0.8 million impairment/restructuring charge. Including the impairment and restructuring charge, direct contribution to profit for the quarter grew 3%, or was essentially flat excluding foreign exchange.

STMS revenue for the full year was up 1% to $999 million, or 4% excluding foreign exchange. Top-line results were driven by increased journal subscriptions, new journal society business and digital book growth. Through April 2011, subscription receipts for calendar year 2011 grew approximately 3% over calendar year 2010. Direct contribution to profit for the twelve months, excluding last year’s impairment/restructuring charges of $15 million, rose 1%, or 5% excluding FX. Revenue growth and margin improvement due to outsourcing journal production and fulfillment was partially offset by higher operating costs from business growth. Including the impairment/restructuring charges, direct contribution grew 5%, or 9% on a currency neutral basis.

  • Fourth quarter revenue down 4% excluding FX; up 1% full year
  • Quarterly softness due to Borders’ impact on consumer titles. Borders represented about 5% of projected P/T sales for fiscal year 2011. All other key customers showed growth.
  • Fourth quarter contribution to profit down 2% excluding FX; up 5% full year, excluding the Borders bad debt charge in the third quarter
  • Digital revenue at 10% of P/T overall. This is up from 7% in FY10.
  • Fourth Quarter eBook revenue up 145% over prior year to $9 million
  • eBook revenue for the full year up 127% to $23 million, or 5% of P/T revenue

Fourth quarter P/T revenue fell 3% to $110 million, or 4% on a currency neutral basis primarily due to the disruption caused by the Borders bankruptcy. Ebook grew 145% over prior year to $9 million. Weakness in consumer titles mainly due to Border's issues and a strong fourth quarter of the prior year due to the initial publication of Office 2010 titles were partially offset by strong growth in the business/finance category.

Direct contribution to profit fell 1% to $24 million for the quarter, reflecting top line results mitigated by lower accrued incentive compensation.

P/T revenue for the full year grew 2% to $437 million, or 1% on a currency neutral basis. Growth in business/finance and professional education was offset by lower consumer sales due to the Borders disruption. Excluding the Borders bad debt charge of $9 million ($6 million after-tax) in the third quarter, fiscal year 2011 direct contribution to profit increased 5% to $105 million due to revenue growth and improved margins from higher eBook sales. On a reported basis, direct contribution to profit declined 5% to $95 million.


  • Fourth quarter revenue +6% excluding FX, +7% full year
  • Fourth quarter contribution to profit improved $2 million over prior year excluding FX, or $13 million,+15% full year
  • Fiscal year 2011 digital revenue now 16% of higher education business, up from 13% in prior year
  • Fiscal year 2011 non-traditional and digital revenue grew 26% to $84 million, representing approximately 27% of global HE revenue vs. 24% in fiscal year 2010.
  • Annual gross margin up for third consecutive year due to increased digital-only sales

Fourth quarter HE revenue grew 8% to $48 million, or 6% excluding foreign exchange. Non- traditional and digital revenue sales in North America and higher School sales in Australia drove results. Sales of non-traditional and digital products were up 44%. Non-traditional and digital revenue includes WileyPLUS, eBooks, digital content sold directly to institutions, binder editions and custom publishing.

Direct contribution to profit for the quarter improved by $2 million, reflecting top line results and higher gross margins due to increased sales of ebooks and other digital products.

For the full year, HE revenue advanced 9% to $307 million, or 7% excluding foreign exchange reflecting growth in all regions. The results were driven by increased student enrollment, strong back-list sales driven by 25% revenue growth in non-traditional and digital products and a strong front list in engineering/computer science and science categories. Direct contribution to profit increased 17% to $101 million, or 15% excluding foreign exchange. Top-line growth, improved gross margin from higher digital revenue and cost containment drove the results.

Wolters Kluwer reported half year numbers (WK):
Highlights include strong operating performance, a strategic re-focusing of the Health & Pharma Solutions division, and reiterated outlook for 2011.
The information in this press release is based on continuing operations, excluding the planned divestment of the pharma business, unless stated otherwise.
  • 3% revenue growth in constant currencies to €1,619 million (1% organic) fueled by strong growth in electronic and service subscriptions which grew 7% in constant currencies.
  • Online, software, and services now constitute 72% of total revenue.
  • Ordinary EBITA up 3% in constant currencies (1% organic) supported by migration to higher margin electronic products and contributions from the Springboard program.
  • Diluted ordinary EPS of €0.65 increased 2% over prior half year.
  • Solid free cash flow of €131 million impacted by tax payments, on track for full-year guidance.
  • Planned divestment of pharma business will focus the Health & Pharma Solutions division on leading market positions in professional information and clinical solutions; non-cash impairment charge of €106 million recorded as part of discontinuing operations.
  • Full-year guidance for total Company reiterated for 2011.
Revenues grew 3% in constant currencies to €1,619 million, with organic growth of 1% (HY 2010: 0%). Legal & Regulatory revenues were in line with HY 2010, with organic growth improving markedly from -3% organic growth at HY 2010 led by strong results in North America. Tax & Acccounting revenues fell 1% organic, impacted by the restructuring of bank product revenue (2% of annual division revenues), which is expected to shift revenues into the second half year. Health & Pharma Solutions revenues grew by 9% in constant currencies (6% organic), driven by strong growth at Ovid and double-digit growth in Clinical Solutions. Financial & Compliance Services’ revenue growth of 17% (3% organic) was supported by double-digit growth in Audit, Risk, and Compliance (ARC Logics), strong performance from banking and compliance products, and global expansion through the acquisition of FRSGlobal. Emerging market results are advancing, with revenues in China growing with strong double-digit numbers.
Ordinary EBITA improved 3% in constant currencies to €325 million. The company improved profitability by the continued shift towards higher margin electronic solutions, diligent cost management, and the impact of the Springboard operational excellence program.
Reed Elsevier reported half year numbers (Reed):
First half underlying growth in all businesses
  • Underlying revenue growth +1%, or +3% excluding biennial exhibition cycling
  • Improving performance from large subscription and data businesses
  • Cyclical businesses recovering
  • Adjusted operating margin +1.3% pts at 26.6%
  • Return to growth in adjusted earnings per share: +5%
Reed Elsevier’s Chief Executive Officer, Erik Engstrom, commented:

“The first half has seen the growth trajectory improve with our large subscription and data revenues strengthening and most of our cyclical businesses recovering.

Good growth in global scientific and medical research activity has supported spend on research information and tools. The risk business with its pipeline of new product innovation is expanding its data and analytics across insurance carriers’ workflow. In our legal businesses new sales continue to grow and our product and content enhancements are resonating well with customers. Our exhibitions are demonstrating the value of their offering with strong growth in the annual shows and a further acceleration of the new launch programme. Reed Business Information has returned to underlying revenue growth and delivered its highest margin in recent history, as it continued to focus the portfolio on high growth data services and online marketing, and increased the efficiency in its operations.

With positive momentum across our businesses, we continue to expect a gradual improvement in performance.”

Elsevier (44% of adjusted operating profit)

  • Revenue growth +2% (+2% underlying), adjusted operating profit +5% (+4% underlying), at constant currency
  • Growing research activity supporting science and medical research related spend
  • Health Sciences: good growth in electronic solutions offset by continuing weakness in European pharma promotion, print books and US career school enrolments
  • Budget environment mixed; varies considerably by geography and customer

LexisNexis Risk Solutions (23% of adjusted operating profit)

  • Revenue growth +3% (+4% underlying), adjusted operating profit +5% (+6% underlying), at constant currency
  • Strong growth in insurance data and analytics (+7%) supported by new product pipeline
  • Growth across all of business services, government and screening solutions; varies by market
  • Insurance software licence business -25% (£7m/€8m); carriers postponing enterprise systems purchases

LexisNexis Legal & Professional (12% of adjusted operating profit)

  • Revenue growth -1% (+1% underlying), adjusted operating profit -4% (-2% underlying), at constant currency
  • Return to underlying revenue growth; adjusted operating margin flat
  • Legal markets stabilised but recovery in activity levels muted; new sales growing, content and product enhancements resonating
  • Strong growth outside US in online services largely offset by print declines

Reed Exhibitions (15% of adjusted operating profit)

  • Revenue growth -3% (-4% underlying), adjusted operating profit -7% (-8% underlying), at constant currency
  • Underlying revenues +10% excluding impact of biennial show cycling
  • Strong growth in annual events across all geographies
  • Expanded launch programme with over 40 new launches expected for the full year

Reed Business Information (7% of adjusted operating profit)

  • Revenue -8% (+2% underlying), adjusted operating profit +32% (+12% underlying), at constant currency
  • Return to underlying revenue growth; adjusted operating margin up 4.7% pts to 15.4%
  • Strong growth in data services and online marketing solutions
  • Leading brands returned to growth in the first half; continuing difficult print advertising markets in other business magazines

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