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Reed Elsevier shows its smarts

Professional information giant Reed Elsevier continues to best its rivals, but looks fully valued
July 25, 2014

Shares in professional information giant Reed Elsevier (REL) climbed 4 per cent after reporting that sales and operating profits - adjusted for currency shifts, acquisitions and disposals - rose in all four of its main divisions.

IC TIP: Hold at 975p

Reed's strategy of shifting from print to digital media without relying on volatile advertising revenues continues to pay off. Investing in its global technology platforms and expanding into new markets and geographies drove a 5 per cent increase in adjusted operating profit to £860m in the half year.

Both underlying sales and operating profits rose 6 per cent at Reed's newly combined business information and risk solutions segment, as insurers rushed to buy its new products and financial services clients spent heavily on its identity verification and fraud solutions. But the star performer was its exhibitions segment: strong demand for events in the US and Japan boosted underlying sales and operating profits by 8 per cent.

The legal segment also performed well, despite weak print sales and subdued US and European markets, managing to grow underlying operating profit by 5 per cent to £111m. And although print declines plagued Reed's scientific, technical and medical division, growing interest in online journals and information databases helped it grow sales by 3 per cent.

Broker Numis Securities expects pre-tax profit of £1.65bn, giving EPS of 57.6p, rising to £1.76bn and 61.5p in 2015.

REED ELSEVIER (REL)
ORD PRICE:975pMARKET VALUE:£11.2bn
TOUCH:975-976p12-MONTH HIGH:985pLOW: 786p
DIVIDEND YIELD:2.6%PE RATIO:21
NET ASSET VALUE:166p*NET DEBT:170%

Half-year to 30 JunTurnover (£bn)†Pre-tax profit (£m)†Earnings per share (p)†Dividend per share (p)†
20133.03626226.65
20142.85606207.00
% change-6-3-9+5

Ex-div: 6 Aug

Payment: 28 Aug

*Includes intangible assets of £7.4bn, or 647p a share

†Turnover and pre-tax profit are for the combined Anglo-Dutch entity, while earnings and dividend per share are for Reed Elsevier plc