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Growth returns to Reed Elsevier

RESULTS: Growth has returned to Anglo-Dutch publisher Reed Elsevier, and management has ruled out large disposals
February 16, 2012

Underlying growth has returned at Anglo-Dutch publishing group Reed Elsevier – the group beat City forecasts to deliver a 5 per cent increase in adjusted operating profit in 2011 to £1.6bn. However, chief executive Erik Engstrom has now ruled out any large disposals within the business.

IC TIP: Hold at 538p

That could reflect the fact that revenue growth at data and analytics business Reed Business Information (RBI) has finally returned after three consecutive years of declines. In fact, underlying sales there rose 1 per cent to £695m. The continued disposal of print titles has also resulted in the data operations side now generating a quarter of RBI's sales. Growth has also returned at the Lexis Nexis Legal and Professional unit, with sales up 1 per cent to £1.63bn.

Mr Engstrom adds that legal markets have now stabilised and, as such, Reed will be rolling out new products to bolster sales in 2012. Meanwhile, the Lexis Nexis risk management unit has continued to strengthen, with revenues there rising 4 per cent to £908m. Still, the exhibitions business derived flat sales of £707m – although growth should return this year as a result of the cycling in of biennial shows.

Numis Securities expects 2012 pre-tax profit of £1.48bn, giving EPS of 50p (from £1.39bn and 46.7p in 2011).

REED ELSEVIER (REL)

ORD PRICE:538pMARKET VALUE:£6.54bn
TOUCH:537.5-538p12-MONTH HIGH:581pLOW: 445.9p
DIVIDEND YIELD:4%PE RATIO:17
NET ASSET VALUE:179p*NET DEBT:155%

Year to 31 DecTurnover (£bn)†Pre-tax profit (£m)†Earnings per share (p)†Dividend per share (p)†
20074.5881249.718.1
20085.3361722.120.3
20096.0743517.220.4
20106.0676827.320.4
20116.0094832.421.6
% change-1+23+19+6

Ex-div: 25 Apr

Payment: 12 May

*Includes intangible assets of £8.2bn, or 676p a share

†Turnover and pre-tax profits are for the combined entity while earnings and dividends per share are for the plc