1 / 66

Preliminary Results 2001

Preliminary Results 2001. Highlights. Strong financial result despite economic slowdown Above market revenue growth and double digit earnings growth achieved one year early Harcourt makes strong contribution, ahead of expectations

roddy
Download Presentation

Preliminary Results 2001

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Preliminary Results 2001

  2. Highlights • Strong financial result despite economic slowdown • Above market revenue growth and double digit earnings growth achieved one year early • Harcourt makes strong contribution, ahead of expectations • On track to meet strategic and financial targets for 2002 and beyond

  3. Financial Update Mark Armour Chief Financial Officer

  4. Adjusted Profit And Loss 2001£m 2000£m 2001€m 2000 €m % changeconstant 12 months to 31 December Turnover 4,560 3,768 7,342 6,180 +18 % 990 1,594 +22 Adjusted operating profit 793 1,301 % Operating margin 21% 21% 22% 22% Net interest expense (142) (103) (229) (169) Adjusted profit before tax 690 1,132 % 848 1,365 +20 Adjusted figures exclude amortisation of goodwill and intangible assets and exceptional items

  5. 2000 2000 2001 2001 2000 2000 2001 2001 Science & MedicalRevenues up 44% - operating profit up 34% - margin 33.6% Revenues Operating profit • Elsevier Science: underlying revenues up 8%; operating profit up 13% • Strong subscription renewals and growing online sales • Harcourt STM: proforma revenues up 3%; proforma operating profit up 5% • Integration progressing well £m €m £m €m

  6. 2000 2000 2001 2001 2000 2000 2001 2001 LegalRevenues up 7% - operating profit up 9% - margin 20.1% Revenues Operating profit • Underlying revenues up 5%; operating profit up 9% • Operating margins improved to 20.1% • North American Legal Markets online up 10% • LexisNexis International solid performance £m €m €€ £m €m

  7. 2000 2000 2001 2001 2000 2000 2001 2001 EducationRevenues up 177% - operating profit up 218% - margin 22.8% Revenues Operating profit • Harcourt Education and Testing: proforma revenues up 12%and operating profits up 10% • Harcourt K-12 revenues up 11%; Harcourt Testing revenues up 22% • Harcourt overall leader in winning new state adoption revenues • REPP: underlying revenues up 8%; operating profit up 10% £m €m £m €m

  8. 2000 2000 2001 2001 2000 2000 2001 2001 BusinessRevenues down 5% - operating profit down 8% - margin 15.2% Revenues Operating profit • Underlying revenues down 3%; operating profit down 8% • Significant downturn in advertising markets, particularly US • Strong outperformance of market • Good performance by Exhibitions; revenues up 9%; operating profit up 6% • Aggressive cost cutting programme; $90m annual savings £m €m £m €m

  9. Adjusted Profit Before Tax: Reconciliation 12 months to 31 December £m % change €m % change 2000 Adjusted profit before tax 690 1,132 Base business 34 +5% 56 +5% Equity issue 59 +9% 97 +9% Acquisitions/Disposals (8) -1% (13) -1% Harcourt 56 +8% 92 +8% Currency translation effect 17 +3% 1 +1% 2001 Adjusted profit before tax 848 +23% 1,365 +21% Adjusted figures exclude amortisation of goodwill and intangibles and exceptional items

  10. Cash Flow 12 months to 31 December 2001 £m 2000 £m 2001 €m 2000 €m Adjusted operating cash flow 1,006 775 1,620 1,271 % conversion 102% 98% 102% 98% Free cash flow 459 334 738 548 Acquisition spend (2,295) (914) (3,694) (1,499) Disposals 96 153 154 251 Other exceptional items 44 (63) (71) (103) Total cash outflow before financing (1,696) (490) (2,731) (803)

  11. Earnings and Dividends Reed International Elsevier % change constant Adjusted EPS 26.1p +12% €0.64 +8% +10% Equalised dividends 10.5p +5% €0.30 +7% +5%

  12. Reported Profit Attributable 12 months to 31 December 2001 £m 2000 £m 2001 €m 2000 €m Adjusted profit attributable 624 511 1,005 838 Amortisation of goodwill and intangible assets (507) (468) (816) (768) Exceptional items 9 (10) 13 (16) Reported profit attributable 126 33 202 54 Reed International EPS 4.8p 1.0p Elsevier EPS €0.13 €0.04

  13. Strong Financial Position • Efficient and robust capital structure following Harcourt financing • Credit rating of A3/A- • EBITDA/net interest cover target: 5 times+ over longer term • Strong cashflow and negative working capital

  14. Strategy & Execution Crispin Davis Chief Executive Officer

  15. Upgrade management effectiveness Add acquisitions/ alliances Demonstrably superior products Build global capability Upgrade sales & marketing Focus on four corebusinesses Major cost savings Substantially increased investment Key Foundations of Growth Strategy

  16. 1999 revenues Pro forma revenues post Harcourt Science 20% Science 26% Business 28% Business 43% Legal 32% Education 20% Legal 26% Education 5% Reshaping Reed ElsevierMore Balanced Portfolio

  17. 1999 operating profit Pro forma operating profit post Harcourt Business 19% Business 31% Science 29% Science 38% Education 18% Education 5% Legal 35% Legal 25% Reshaping Reed ElsevierMore Balanced Portfolio

  18. Reshaping Reed ElsevierAdvertising Revenues % Total RE Revenues 1999 Post Harcourt Business to Business 21% 12%(including recruitment) Legal 2% 2%(Martindale-Hubbell) Science 1% 1%(Healthcare) 24% 15%

  19. Science & Medical:2001 Strategic Milestones • Further upgrade of ScienceDirect • new customised products  • enrich content, including backfiles  • add navigation tools  • Broaden user base • upsell existing users  • expand to new users  • increase overall usage  • Successfully integrate Harcourt STM • reorganise medical operations  • realise $40 million of synergies ON TRACK • accelerate online solutions ON TRACK

  20. 210,000 articles added 1.8m articles in total IDEAL content to be included Core Article Content 23 collections launched Subject specific navigation tools Customised Subject Collections 5 modules launched Archive Backfiles Access to over 70m web pages 1m page requests per month Scirus Immediate online publication 800 journals covered Articles in Press Electronic submission Article tracking E-mail alert Author Gateway ScienceDirect:Extending Product Superiority

  21. Marketplace Impact:Positive Key Performance Indicators • Increasing penetration of ScienceDirect • Continued increase in usage • Subscriber attrition reduced • Major new contracts signed • Market acceptance of ScienceDirect

  22. ScienceDirect:Increasing Penetration 80 70 60 50 % 40 30 20 10 0 Mar Aug Feb Aug Dec Aug Dec 99 99 00 00 00 01 01

  23. ScienceDirect:Increase in Usage Number of page views (millions) 25 20 15 10 5 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan 00 00 00 00 00 00 01 01 01 01 01 01 02

  24. 8.5 6.0 5.2 4.1 4.0 Science & Medical:Reversal in Attrition 10 8 6 % 4 2 0 1997 1998 1999 2000 2001

  25. Marketplace Impact:Major New Contracts • 450 ScienceDirect contracts signed;increase of 50% over 2000 • Consortium deals in Switzerland, Eastern Europe, Italy, Germany, New Jersey • Over 50% of ScienceDirect contracts now for three year period

  26. Health Sciences: Strategic Priorities • Upgrade management effectiveness • Build one cohesive market driven organisation • New management team • Develop superior products • Step up product development and publishing programmes • Major upgrade of sales and marketing • Develop superior online capabilities and products to accelerate growth

  27. Global title planning Product quality review Specialist editions Infill acquisitions Revitalise Core Publishing Integrated into 2 functions - US and international Upgrade Sales & Marketing Extensive research programme MD Consult handheld/PDA products launched Interactive courseware Develop Superior Online Capabilities Single communications/advertising division for pharmaceutical sector Integrate Specialist Divisions Global product database Integrated fulfilment Consolidated purchasing, etc. Integrate Systems Health Sciences:Product, Sales/Marketing, Organisation Upgrade

  28. Science & Medical:2002 Priorities • Maintain ScienceDirect momentum on key performance yardsticks: usage, penetration and attrition • Deliver on new product initiatives programme driving additional revenues • Implement core medical growth programme • Finalise online medical strategy; start implementation • Complete Harcourt integration, deliver revenue and cost targets

  29. Legal:2001 Strategic Milestones • Continued product upgrade:content, customisation, functionality  • Strengthen targeted marketing/sales effortsbehind upgraded products  • Monetise increased usage  • Improve print performances withinonline migration strategy ON TRACK • Adopt LexisNexis as global brandand product platform ON TRACK • Expand geographical presencein key markets X

  30. Comprehensiveresearch offeringgaining preference • #1 source for tax material • Case Summaries/ Annotated Codes • Integrated tax content Enhanced Content • E-Treatises – linking of primary law to analytical treatises • Substantial increasein analytical treatises searches Enhanced Navigation • Smartlinx – public records search • Search Advisor/Core Terms - advanced search system • Smartlinx - $6m in new contracts in 6 months Enhanced Functionality • Over 300 customisations for law firms • 500 customised versions of nexis.com • Integration into intranets • Nexis - E-solutions Customisation LexisNexis:Continued US Product Upgrade

  31. Marketplace Impact:Positive US Key Performance Indicators • Turnaround in revenue growth; outperformed market • Competitive preference in law schools • Outstanding growth in online usage • Major new contracts won • Market acceptance of new LexisNexis products

  32. +5% +3% +2% +2% Marketplace Impact:Turnaround in US Revenue Growth 6 5 4 % 3 2 1 0 1998 1999 2000 2001 Outperformance of market growth of 4%

  33. 54 50 32 19 15 Marketplace Impact:US Law School Preference LexisNexis in Law Schools (%) 60 50 40 30 20 10 0 Fall Fall Fall Fall Fall 1997 1998 1999 2000 2001

  34. 30% Increase in Commercial Searches 100 95 80 73 60 57 40 20 0 1999 2000 2001 Marketplace Impact:US Online Usage Growing Rapidly m Overall online revenue growth: 7%

  35. Marketplace Impact:Major New Contracts • Major new Legal contracts • Preferred vendor agreements closed with five of top US law firms • Contracts volume increased more than 25% in Small Law Firm market • Major new Nexis contracts • US Federal Law Agencies, US Immigration and Naturalization Service, Sprint, Proctor & Gamble, BBC, Rothschilds • Major multi-year contracts signed with governments of Hong Kong and Australia

  36. LexisNexis International • Over 25% growth in online revenues • UK legal online revenues doubled • Superior online products • 26 new specialist services in UK • online version of key legal encyclopaedia and legal portal launched in France • Development of integrated global platform for superior online products in all markets • Asia Pacific and Latin America • Strong performance in Asia Pacific • Latin America impacted by economic conditions • New organisation and management to drive growth

  37. Legal:2002 Priorities • Further upgrade of electronic product: content, functionality, customisation to achieve preferred product status • Accelerated growth of online usage; monetise • Maintain competitive preference in law schools • Implement margin improvement programme – towards mid-20s target • Accelerate global expansion: geography, global platform, branding, organisation

  38. Education:2001 Strategic Milestones • Maintain momentum in K-12 • achieve #1 overall market share in 2001 adoptions  • secure existing highly regarded management  • maintain product development momentum  • Maintain momentum in Testing • exploit leadership position to capture growth  • expand in-house scoring capability ON TRACK • Develop successful e-strategy • complete research programme  • finalise e-strategy programme  • Integrate Rigby and Steck-Vaughn  • Complete Thomson on-sale 

  39. Education: Outperformance of Market 1997 1998 1999 2000 2001 US Education Market* Growth % 13 12 2 13 7-8 Harcourt Education** Growth % 21 9 4 33 11  x    Outperform Note: * US Education Market represent total K-12 textbook sales as reported by Association of American Publishers (AAP) for years 1997-2000. 2001 Harcourt estimate. ** Harcourt Education sales include elementary, secondary, and supplemental (Steck-Vaughn).

  40. Education: Performance in 2001 Adoptions Elementary Secondary Reading/Literature # 3 #1 Language Arts # 1 # 1 Mathematics # 1 # 3 Social Studies # 1 # 3 Science # 1 # 1 Overall # 1 Overall # 1

  41. Education:E-learning Programme • E-strategy:Major research programme to determine customer needs and future strategy • E-content:Technology programme established in-house, supported by Riverdeep alliance • E-professional development:Acquisition of leading online provider: Classroom Connect • E-testing:Increased investment in classroom testing and electronic scoring

  42. K-12 Education Market:Future Growth • Average growth for past 5 years: 8-9% per year • Consistent increase in spend per pupil • Enrolment slowing but growing • Significant increase in federal spending • Political will at state level remains strong • Rapid testing growth will be maintained/accelerated Over next 3-5 years, good growth in K-12 market

  43. Education • Consistent success in US schools publishing • On track to deliver above market growth in 2002 • Research based E-strategy established; measured implementation underway • International business and global development on track • Good medium to long term market outlook

  44. Education:2002 Priorities • Win greatest share of new K-12 basal and supplementary spending: US and international • Win greatest share of educational testing contracts • Establish strong core competencies and focus in electronic product development and sales • Ensure basal/supplementary publishing programmes on track for 2003/2004 growth • Organisation: appoint division head; align Harcourt values/culture with Reed Elsevier

  45. Business:2001 Strategic Milestones • Maintain print share momentum throughupgraded product/sales programmes  • Maximise revenues and returnsfrom internet programme  • Drive global strategy:organisation, portfolio, platforms, acquisitions/disposals ON TRACK • Complete integration ofMiller Freeman Europe and CMD Group  • Respond quickly to changingeconomic environment 

  46. Significant decline in revenues in second half; costs cut aggressively; margin held US • Revenue decline in second half; weakness in IT spread to other sectors UK Continental Europe • Subscription and circulation holding up; advertising slowdown in second half Global Exhibitions • Europe & Rest of World robust; weakness in US autumn shows Overall • Outperformance of market; small decline in revenues and profit Continuing Tough Markets in B2B

  47. Business: Outperformance of Market • Leadership positions in almost all sectors • Geographic and sector spread • Investment led momentum has built share • Effective management of costs • Continued strong online growth

  48. Business:Market Share Gains Cahners RBI Broadcasting & Cable +12% EDN +2% Interior Design +4% Multichannel News +3% Variety +2% Computer Weekly +10% Electronic Weekly +8% Farmers Weekly +11% Flight International +6% New Scientist + 5% EBI Based on % gain in share of ad pages January - December 2001; excludes yield effects Bizz +3% Distrifood +6% Fem/De Week +5% Groenten & Fruit +9%

  49. 95 57 22 Business:Total Online Revenue Growth $m 120 100 80 60 40 20 0 1999 2000 2001

  50. Business:2002 Priorities • Deliver above market revenue growth in all key markets • Further upgrade magazine quality and sales effectiveness • Build more integrated global B2B business: brands, sectors, customers • Achieve meaningful margin improvement at Cahners • Drive internet solutions to achieve double digit revenue growth

More Related