Anglo-Dutch publishing group Reed Elsevier saw its shares plunge 16 per cent to 12-month trading lows of 403p after it announced a cash call to help alleviate mounting debts. The announcement took the spotlight away from Reed's half year results, which revealed a 7 per cent decline in underlying revenues, and a sharp drop in profits following a series of exceptional charges and higher finance costs.
The share placing represents 9.9 per cent of Reed's issued share capital and raised gross prceeds of £824m. The cash call comes as the group, which geared up for its £2.1bn acquisition of US credit reference company ChoicePoint last September, terminated plans to dispose of Reed Business Information (RBI) due to unfavourable credits markets. So, in order to maintain its investment grade rating, Reed has been forced to turn to investors.
The half year results were weighed down by continued weakness in RBI and the exhibitions business which account for 20 per cent of underlying operating profit. RBI has come under severe pressure, and despite subscription and data service revenues holding firm, the slump in advertising revenues dragged sales down 17 per cent on a constant currency basis. The exhibitions unit reported sales down 22 per cent to £356m. Worryingly, organic revenue growth at the supposedly more resilient Lexis Nexis business fell 3 per cent and with legal markets not expected to improve, a "modest" decline in underlying revenues is expected over the year.
The results were also hit by £103m of exceptional restructuring costs, £22m of acquisition related costs, a £140m goodwill impairment charge - mainly for RBI US where titles are being sold - and amortisation charges of £195m. On an adjusted basis, pre-tax profits were slightly ahead of City expectations at £644m. Restructuring benefits are due to produce additional cost savings of $160m (£97m) this year, and annualised savings of $350m from 2011.
Analysts at Cazenove Research are expecting full year adjusted EPS of 47.5p, although this falls to 45p in 2010 (2008: 44.6p).
REED ELSEVIER (REL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 414p | MARKET VALUE: | £ 4.6bn | |
| TOUCH: | 414.25-414.5p | 12-MONTH HIGH: | 641p | LOW:403.75p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 27 | |
| NET ASSET VALUE*: | 57p | NET DEBT: | £5.1bn | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Net dividend per share (p) |
|---|---|---|---|---|
| 2008 | 2.45 | 393 | 14.1 | 5.3 |
| 2009 | 3.06 | 188 | 7.1 | 5.4 |
| % change | +25 | -52 | -50 | +2 |
Ex-div:03 Aug Payment:28 Aug *includes intangible assets of £7.9bn, or 715p per share **Turnover and pre-tax profits are for combined entity whilst earnings and dividends per share are for PLC. | ||||
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