Our strategy is directed at the delivery of authoritative content and innovative solutions that are increasingly embedded in our customers’ workflows, making them more effective and Reed Elsevier a more valued partner
Deliver authoritative content through leading brands
We deliver high quality essential content to our professional customers
We deliver authoritative content of the highest quality through market leading brands. In our publications and services our professional customers find the essential data, analysis and commentary to support their decisions. Editorial investment and selective acquisitions are generating new sources of content to widen and differentiate the product offering to customers, and to allow expansion into new segments and geographic regions. As online information sources increase, our trusted leadership brands play an ever more vital role.
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Drive online solutions
We are leveraging our leadership brands and authoritative proprietary content to deliver innovative solutions that become embedded in customers’ workflows and enable Reed Elsevier to become an increasingly valued partner
Over the last 10 years our digital revenues have built to £2.7 billion/€3.4 billion, more than 50% of total revenue. Authoritative information delivered through highly functional online services and associated workflow solutions is making our customers more effective professionally and making Reed Elsevier a more valued partner. As our customers in our core science, medical, legal, risk and business-to-business markets rapidly migrate online, there are opportunities to leverage our leadership brands and proprietary content. Digital technology enables us to move up the value chain with our customers by providing a range of innovative solution products that become embedded in their workflows. Further online development is playing a major part in our strategy going forward.
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Improve cost efficiency
We are leveraging the scale, skill sets, technology, resources and collective experience of our businesses to improve cost efficiency
Digital growth and an increasingly synergistic portfolio provide opportunities to further leverage scale and commonalities across the business, sharing skill sets, resources and collective experience. Opportunities identified across our businesses in organisational consolidation, the supply chain, technology and infrastructure are on track to deliver $200 million of annual cost savings by 2011 through the restructuring programme announced in February 2008. This programme has since been expanded and, together with the addition of a major restructuring programme in Reed Business Information, we are targeting a further $150 million of annual savings by 2011. Our focus on operational efficiency is aimed at delivering good operating margins while funding ongoing investment in new products and markets.
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Reshape and strengthen portfolio
We allocate capital and resources through a combination of internal investment and selective acquisitions to pursue opportunities that accelerate our strategic and business progress
We have been implementing an important reshaping of the business, with the strategic goal of moving more assets away from slower growth, cyclical advertising/print based sectors, and more towards faster growth, less cyclical online based sectors. In addition to significant internal development, we have spent £3.6 billion/€4.8 billion on acquisitions and completed disposals with a value of £2.4 billion/€3.4 billion over the past five years to meet this strategic goal. We have developed and acquired strong brands and proprietary content, customer workflow solutions and leading technologies, and expanded into attractive adjacent markets, most notably in risk management, legal solutions, health, e-business, and exhibitions in emerging markets.
In 2007 and early 2008 we completed the sale of the Harcourt Education business and in September 2008 we completed the acquisition of ChoicePoint which transforms our position in the attractive risk information and analytics sector. The planned divestment of Reed Business Information announced in February 2008 was put on hold given the poor credit markets and macroeconomic environment; it however remains the intention to divest RBI in the medium term when market conditions are more favourable.
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Financial strategy
Our business and financial strategy is directed at building revenue momentum, good margin improvement, high cash generation, adjusted earnings per share growth and growing returns on capital
We are well positioned in markets with attractive long term growth prospects sustained by the continuing demand for professional information. We have a clear investment led growth strategy focused on building revenue momentum across all our businesses. This, together with improvements in cost efficiency and organisational effectiveness, will flow through to operating profitability and cash flow.
We manage the capital structure to support our objective of maximising long term shareholder value through ready access to the debt and capital markets, cost effective borrowing and flexibility to fund business and acquisition opportunities whilst maintaining appropriate leverage to optimise the cost of capital. Over the longer term we target credit metrics consistent with a solid investment grade credit rating, including net debt to adjusted EBITDA in the range of 2x to 3x.
Our use of cash over the longer term reflects these objectives through a progressive dividend policy, selective acquisitions and from time to time, to maintain an appropriate capital structure, share repurchases. Our current focus is on the repayment of debt out of cash flow to restore Reed Elsevier’s credit ratios to more usual levels following the ChoicePoint acquisition.
Our incentive programmes are designed in support of these strategies and in creating shareholder value.