REED ELSEVIER FINANCIAL AND OPERATIONAL HIGHLIGHTS
Reed Elsevier continued to make good progress against its strategic and financial priorities in the first half of 2014.
Revenue of £2,847m/€3,473m; underlying growth +4% (+3% excluding biennial exhibition cycling): The overall underlying growth rate reflects continued growth of +5-7% in electronic and face-to-face revenues, which accounted for 84% of the first half total, partially offset by continuing print revenue declines.
Adjusted operating profit of £860m/€1,049m; underlying growth +5%: The improvement in profitability reflects a combination of underlying revenue growth, process innovation and portfolio development. Reported operating profit, after amortisation of acquired intangible assets, was up +2% to £697m/+5% to €850m.
Interest and tax: Adjusted net interest expense was £23m/€25m lower at £69m/€84m reflecting the benefits of term debt refinancings and other initiatives over the last 18 months. The adjusted effective tax rate was unchanged at 23.5%.
Adjusted EPS: Growth at constant currencies +11%; first half EPS benefited from timing of term debt refinancing and share buybacks. Reed Elsevier PLC 27.8p (26.5p); Reed Elsevier NV €0.52 (€0.48).
Reported EPS: Reed Elsevier PLC 20.0p (22.0p), Reed Elsevier NV €0.39 (€0.42), reflecting the absence in the first half of 2014 of a non-recurring deferred tax credit recognised in the first half of 2013.
Equalised interim dividend growth for Reed Elsevier PLC +5% to 7.00p; for Reed Elsevier NV +14% to €0.151: The difference in interim dividend growth rates reflects exchange rate movements since July 2013.
Net debt/EBITDA 2.3x on a pensions and lease adjusted basis (unadjusted 1.8x): Net debt was £3.3bn/€4.1bn at 30 June 2014. The adjusted operating cash flow conversion rate was 89% (85%). For the full year we continue to expect a cash conversion rate of over 90%, in line with prior years.
Organic development: In the first half of 2014 we continued to develop our global technology platforms across the business, launch new products and services in both existing and adjacent market segments, and extend our reach in high growth markets and geographies. Capital expenditure as a percentage of revenues was slightly lower at 4.3% (5.0%) due to phasing.
Acquisitions & disposals: We completed 10 small acquisitions of content, data assets and exhibitions in the first half of 2014 for a total consideration of £95m. We also completed the disposal of 6 assets for a total consideration of £26m.
Share buybacks: We previously announced our intention to deploy a total of £600m on share buybacks in 2014 as part of our pragmatic approach to ensuring that the value compounding within the business translates into shareholder value. So far we have completed £400m of this total, leaving a further £200m to be deployed by the end of the year.
FULL YEAR 2014 OUTLOOK
The full year outlook is unchanged. Underlying trends in our business continue to be positive as we enter the second half, and we remain confident that, by continuing to execute on our strategy of delivering improved outcomes to our professional customers, primarily through organic investment, we will deliver another year of underlying revenue, profit, and earnings growth in 2014.
