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I N T E R I M R E S U L T S 2 0 0 3

I N T E R I M R E S U L T S 2 0 0 3. Highlights. Good performance in challenging markets Continuing strong progress against strategic priorities Acceleration of growth in second half On track to deliver 2003 targets. Financial Update. Mark Armour Chief Financial Officer.

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I N T E R I M R E S U L T S 2 0 0 3

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  1. I N T E R I M R E S U L T S 2 0 0 3

  2. Highlights • Good performance in challenging markets • Continuing strong progress against strategic priorities • Acceleration of growth in second half • On track to deliver 2003 targets

  3. Financial Update Mark Armour Chief Financial Officer

  4. Adjusted Profit And Loss 2003£m 2002£m 2003€m 2002 €m % changeconstant 6 months to 30 June Turnover 2,345 2,467 3,424 3,972 0 % 496 724 0 Adjusted operating profit 505 813 % Operating margin 20.5% 20.5% 21.2% 21.2% Net interest expense (88) (107) (128) (172) Adjusted profit before tax 398 641 % 408 596 +3 • Reported results reflect currency translation effects Adjusted figures exclude amortisation of goodwill and intangible assets and exceptional items

  5. 2002 2002 2003 2003 2002 2002 2003 2003 Science & MedicalRevenues up 6% - operating profit up 5% - margin 33.9% Revenues Operating profit • Underlying revenues up 4%; operating profit up 5% • Strong subscription renewals and growing online sales • Science & Technology revenues up 4% • Health Sciences revenues up 3% • Book publishing programme to accelerate second half £m €m £m €m

  6. 2002 2002 2003 2003 2002 2002 2003 2003 LegalRevenues up 4% - operating profit up 17% - margin 20.7% Revenues Operating profit • Underlying revenues up 2%; operating profit up 13% • Strong operating margin improvement in first half • US Legal revenues up 3%; Online up 7% - strong small law • US Corporate & Federal Markets flat; strong risk solutions • International underlying revenues up 3%; accelerating demand for online £m €m €€ £m €m

  7. 2002 2002 2003 2003 2002 2002 2003 2003 EducationRevenues down 5% - operating profit down 32% - margin 7.5% Revenues Operating profit • Underlying revenues down 6%; operating profit down 35% • First half growth unrepresentative; revenues and profit second half weighted • US K-12 revenues flat; orders deferred to second half • Testing revenues down 27%; loss of California contract • International revenues up 1%; UK funding shortfalls £m €m £m €m

  8. 2002 2002 2003 2003 2002 2002 2003 2003 BusinessRevenues down 6% - operating profit down 12% - margin 17.2% Revenues Operating profit • Underlying revenues down 6%; operating profit 12% • Rate of decline in advertising markets slowed; few signs of recovery • Margins defended through continued cost actions • Investment in product quality and disciplined yield management • Exhibitions resilient: revenues down 3% excluding cycling £m €m £m €m

  9. Adjusted Profit Before Tax: Reconciliation 6 months to 30 June £m % change €m % change 2002 Adjusted profit before tax 398 641 Base business 8 +2% 12 +2% Acquisitions/Disposals 5 +1% 7 +1% (64) Currency translation effect -10% (3) - 2003 Adjusted profit before tax 408 +3% 596 -7% Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

  10. Cash Flow 6 months to 30 June 2003 £m 2002 £m 2003 €m 2002 €m Adjusted operating cash flow 177 36% (5) (209) (214) (97) 89 (41) (263) 160 32% (36) (190) (226) (90) 113 (37) (240) 258 36% (8) (305) (313) (141) 130 (59) (383) 258 32% (58) (306) (364) (145) 182 (59) (386) % conversion Free cash flow before dividends Dividends Free cash flow after dividends Acquisition spend Disposals Other exceptional items Total cash outflow before financing

  11. Reported Profit Attributable 6 months to 30 June 2003 £m 2002 £m 2003 €m 2002 €m Adjusted profit attributable 300 293 438 472 Amortisation of goodwill and intangible assets (228) (269) (332) (433) Exceptional items 25 73 36 117 Reported profit attributable 97 97 142 156 Reed Elsevier PLC EPS 3.9p 3.9p Reed Elsevier NV EPS €0.09 €0.10

  12. Adjusted Earnings and Dividends Reed Elsevier PLC Reed Elsevier NV % change constant Adjusted EPS 12.6p +2% €0.28 -7% +3% Equalised dividends 3.3p +3% €0.08 -11%

  13. Strategy & Execution Crispin Davis Chief Executive Officer

  14. Reed Elsevier:Key Objectives For 2003 • Maximise above market organic growth from four core businesses • Execute and deliver on all strategic milestones • Improve operating margin further through increased efficiency • Deliver double digit earnings growth ON TRACK ON TRACK ON TRACK ON TRACK

  15. 124 86 50 28 16 2001 1999 2002 2000 2003* Science & Medical:ScienceDirect:Increasing Usage • Article downloads (millions) * 12 months to 30 June

  16. 4.5 3.3 1.8 1.2 2001 2002 2000 2003* Science & Medical:ScienceDirect:Expanding Content • Full text articles (millions) * At 30 June

  17. 8.5% 5.2% 4.0% 4.0% 4.0% Science & Technology:Continued Low Attrition 1999 2000 2001 2002 2003* * Full Year Estimate

  18. Science & Medical: Health Sciences • Successful front list publishing programme • Accelerating electronic information business • MD Consult 13% ahead • Wide ranging introduction of new products • Significant online education training opportunities • Accelerating international expansion • Local versioning of authoritative content • Acquisition of Holtzbrinck STM in Germany • Integration of book production and distribution on track

  19. Science & Medical: 2003Outlook • Revenue growth to accelerate • Strong 2003 book publishing programme • Continued growth in electronic sales • Cost efficiencies and operational gearing to drive further margin improvement • Expansion of content and innovative electronic services

  20. +20% +22% +31% +17% Legal:US Legal Online Usage Growing • Growth in commercial searches 1999 2000 2001 2002 2003* Online revenues up 7% * To 30 June

  21. Risk Mgmt. Enterprise/Lib. Legal/Tax CFM Law Firms Total LN Legal: Risk Solutions: Long Term Growth Growth in public records

  22. 24.9% 21.3% 20.1% 19.7% 1999 2000 2001 2002 Legal:Optimising Cost Efficiency • Operating margin c.22.5% 2003* *Full Year Estimate

  23. Legal: 2003 Outlook • Maintain above market revenue momentum in US markets • Acceleration of growth from new product initiatives and acquired businesses • Margin improvement from focused cost actions, releasing funds for investment • International – strong growth in online sales mitigated by print migration and weak corporate markets

  24. Education:US Schools Market • Attractive long term growth market • Strong federal and state commitment • Short term market weakness in 2003/2004 • Low point in adoption cycle • State budget pressures • 2003 impact from federal funding modest

  25. Education:Winning Performance in 2003 Adoption Revenues Elementary Secondary Reading/Literature # 3 # 1 Language Arts # 1 # 1 Mathematics # 1 # 3 Social Studies # 1 # 4 Science # 1 # 1 Overall # 1 Overall # 1 = Based on estimated share of total available adoption revenues

  26. Education:Harcourt Assessment • 2003 revenues impacted by loss of California • Momentum regenerated: management, product, scoring, operations • New edition of Stanford Achievement Test launched • Awarded 7 out of 11 state contracts tendered • Strong pipeline of state level bids

  27. Education: 2003 Outlook • US schools market broadly flat; small decline possible • Success in state adoptions will come through as second half sales • Continued success in state Testing contracts • Margin improvement through continuing process efficiency

  28. Business: Trading environment Overall • No marked deterioration; no real sign of recovery US • Variability by sector: Growth in Entertainment; Manufacturing and Electronics still weak; Construction late cycle UK • Variability by sector; Aerospace, Social Services and Property holding up Continental Europe • Economic conditions weaker; resilient subscription revenues mitigated advertising declines across all sectors Global Exhibitions • Impact of economic weakness, SARS and Iraq; cycling out of non-annual shows

  29. $140m $115m $95m $57m $22m Business:Online Revenue Growth 1999 2000 2001 2002 2003* * Full year estimate

  30. Business: Market Outperformance • Continuing to build market share on magazines • Further improvement in yield management • Tight control of costs • Exhibitions challenging, but showing resilience

  31. Business: 2003 Outlook • Continued tough trading conditions across markets • Product quality, sales effectiveness and yield management restrict revenue decline • Continued margin improvement, mitigating impact on profitability • Significant upside as economy recovers

  32. Product Upgrade Initiatives: • Reference works online • Scirus search engine • MD Consult upgrade • EVOLVE medical education platform • ScienceDirect multimedia capability • State annotated codes • e-Filing, e-Access, e-Discovery • Integrated Risk Solutionscapability • Industry Dossier • Global Legal Platform • Market leading adoption programmes • Online HRW Basal • Stanford 10 • Texas STARgate • Alzheimer Quicktest • Totaljobs.com • KellySearch • 14 magazines relaunched • RCD Connect • 16 new exhibitions launched

  33. Sales and Marketing Initiatives: Elsevier Dedicated Engineering/ Life Sciences/Chemistry sales forces Reed Business Customer researchprogramme for all magazines LexisNexis Strengthened small law programme Elsevier Coordinated global price increase programme Elsevier/LexisNexis Implementation of global branding programme All Divisions Execution of sales audit programmes Harcourt Major upgrade of Open Territories sales force Harcourt Global Library marketing programme Reed Business RCD national accounts programme Reed Business Successful yield management programme LexisNexis Key account relationship programme Elsevier Introduction of Health Sciences telesales

  34. Infrastructure and Cost Initiatives: • New content management systems • New customer fulfilment systems • New editorial systems • Off-shore printing/outsourcing • Pre-plate restructuring • Electronic author workbench • New CRM systems • 2000-2002: $500m of savings achieved • 2003: $150m further savings

  35. “Shooting Stars” • All businesses outperforming in dynamic growth sectors • Annual revenue growth at high single/double digit • Total revenue c.$700m • Endeavor Library Services • International Healthcare • e-Healthcare • Risk Management • e-Discovery, e-Filing, e-Access • Clinical Testing • Customised State Testing • On-line recruitment, directories • Variety franchise

  36. Reed Elsevier:Key Objectives For 2003 Unchanged • Maximise above market organic growth from four core businesses • Execute and deliver on all strategic milestones ON TRACK ON TRACK • Improve operating margin further through increased efficiency • Deliver double digit earnings growth ON TRACK ON TRACK

  37. I N T E R I M R E S U L T S 2 0 0 3

  38. Appendices

  39. Turnover: Reconciliation £m % change €m % change 6 months to 30 June 2002 Turnover 2,467 3,972 Base businesses (29) -1% (42) -1% Acquisitions 37 +1% 54 +1% Disposals (13) - (19) - Currency translation effect (117) -5% (541) -14% 2003 Turnover 2,345 -5% 3,424 -14%

  40. Currency Profile:Adjusted Profit Before Tax First half average rates: 2003 2002 $:£ 1.61 1.44 $:€ 1.10 0.90 €:£ 1.46 1.61 LTM to 30 June 2003 Sterling 21% Full year average rates: 2003* 2002 $:£ 1.62 1.50 $:€ 1.13 0.94 €:£ 1.43 1.59 Euro 41% US Dollar 33% Other 5% *2003 average rates (approx) if recent spot rates continue ($1.62:£1; $1.15:€1; €1.41:£1)

  41. Free Cash Flow 2003 2002 2003 2002£m £m €m €m Adjusted operating cash flow 177 160 258 258 Interest (85) (108) (124) (174) Tax (97) (88) (142) (142) Dividends (209) (190) (305) (306) Free cash outflow (214) (226) (313) (364) 6 months to 30 June

  42. Cash Flow Seasonality 12 monthsto 30 June 12 monthsto 30 June H1 H2 H1 H2 2003 2003 2003 2002 2003 2002 €m £m €m £m €m £m 1,499 258 1,241 1,027 177 850 Adjusted operating cash flow Cash flow conversion % 90% 36% 136% 90% 36% 136%

  43. Exceptional Items 6 months to 30 June 2003 £m 2002 £m 2003 €m 2002 €m Reorganisation costs (8) (9) (12) (14) Acquisition related costs (15) (22) (22) (36) Charged to operating profit (23) (31) (34) (50) Net profit on sale of fixed asset investments and businesses 57 9 82 14 Exceptional credit/(charge) before tax 34 (22) 48 (36) Net tax (charge)/credit (9) 95 (12) 153 Total exceptional credit 25 73 36 117

  44. Balance Sheet 2003 £m 2002 £m 2003 €m 2002 €m At 30 June Goodwill/intangible assets 5,541 6,210 7,979 9,563 Tangible fixed assets 489 496 704 764 Investments 143 161 206 248 Working capital 60 (43) 87 (66) 6,233 6,824 8,976 10,509 Shareholders’ funds 2,616 2,859 3,767 4,403 Net debt 2,923 3,296 4,209 5,076 694 669 1,000 1,030 Other net liabilities/minorities 6,233 6,824 8,976 10,509

  45. Dividend Equalisation Interim %Change 2002 2003 Reed Elsevier PLC (p) 3.3 3.2 +3% UK tax credit rate 10% 10% Gross (p) 3.67 3.56 Equalisation ratio 1.538 1.538 Exchange rate (€:£) 1.41 1.59 Reed Elsevier NV (€) 0.08 0.09 -11%

  46. I N T E R I M R E S U L T S 2 0 0 3

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