Reed Delivers Strong Results

Reed Elsevier released full year results for 2001 today which revealed that heavy internet investment is beginning to pay off.

Revenues for 2001 were up 21% to £4,560 million with adjusted pre-tax profits up 23% to £848 million. Underlying revenue rose by 3%, overall operating margins were 1% higher at 22% and operating cashflow conversion was strong.

Total revenues and adjusted operating profits were up 7% and 9% respectively at constant exchange rates. Online sales were up 10% compared to 5% in 2000 and 1% in 1999 and overall operating margins were up 0.4 percentage points to 20.1%. Reed said that these have now started to improve as investment levels begin to stabilise and revenue growth picks up.

Unsurprisingly, the business division had a difficult year due to the weak economy and repercussions of the 11 September attacks. In exhibitions, underlying revenues and adjusted operating profits grew by 9% and 6% respectively. Electronic revenues, primarily internet based, now account for 27% of revenues at Reed and, the company states, are a key driver of profit growth.

Cost savings initiated in 2000 have “significantly mitigated the impact of lower advertising revenues in 2001 and will help protect margins in [the] Business [division] in 2002”.

The statement concluded by saying that “2002 should again see us meeting our key financial targets of above market revenue growth and double digit earnings per share growth at constant currencies, despite the continuing difficult economic environment…. the overall results for the first half of 2002 are likely to be a little lower than last year due to comparison against a strong first half in 2001 in the Business division. The second half should deliver the expected growth for the year given a less demanding comparison in the Business division and the second half weighting of sales and profit in the Harcourt business.”

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