Reed Elsevier is a world leading publisher and information provider. The principal operations are in North America and Europe, serving the science, medical, legal, risk information and analytics and business sectors. Total revenues for the year ended 31 December 2007 were £4,584m.
Reed Elsevier is well positioned in markets with attractive growth prospects and has a clear investment led growth strategy focused on building revenue momentum across all our businesses.
Long term growth in our markets is expected to be sustained by the continuing demand for professional information. In addition, professionals are looking for significant improvements in productivity through access to highly functional online services and associated workflow solutions.
Reed Elsevier is implementing an important reshaping of the business, with the strategic goal of moving more assets away from slower growth, more cyclical advertising/print based sectors, and more towards faster growth, less cyclical online based sectors. Consequently, in 2007 we sold Harcourt Education and in February 2008 announced the planned divestment of Reed Business Information and the agreed acquisition of the online risk analytics business ChoicePoint Inc. Together these moves create a more cohesive and synergistic business and accelerate growth.
Our Strategy
Deliver authoritative content through leading brands. Reed Elsevier delivers authoritative, and to a great extent proprietary, content of the highest quality through market leading brands. In its publications and services Reed Elsevier’s 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 the product offering to customers and to expand into new segments and geographic regions. As online information sources increase, Reed Elsevier’s trusted leadership brands play an ever more vital role.
Drive online solutions. Over the last five years digital revenues have built to £2.1bn or 47% of total revenues. Authoritative information, technology enabled and increasingly integrated into customer workflows, is making Reed Elsevier’s customers more effective professionally and making Reed Elsevier a more valued partner. As Reed Elsevier’s customers and core markets rapidly migrate online, there are opportunities to leverage its leadership brands and authoritative proprietary content. Digital technology enables Reed Elsevier to move up the value chain with its customers by providing a range of innovative solution orientated products that become embedded in their workflow. This is playing a major part in Reed Elsevier’s strategy going forward.
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. Substantial cost savings have been made over the last five years, and there are further opportunities across the supply chain and in technology and infrastructure to continue this progress. Improving cost efficiency remains a fundamental feature of Reed Elsevier.
Reshape and strengthen portfolio. In addition to significant internal investment, Reed Elsevier will continue to allocate capital and resources to pursue selective acquisition opportunities that accelerate its strategy and overall business progress. Reed Elsevier has spent £1.8bn on acquisitions over the last five years, focused on strong brands and proprietary content, customer workflow solutions, leading technologies and expansion into attractive adjacent markets, most notably in legal solutions, risk management, health and e-business.
Financial strategy
Reed Elsevier expects progress in the development of its digital business to deliver good revenue growth and, with improvements in cost efficiency and organisational effectiveness, this will flow through at a higher rate to operating profitability. Additional financial benefits are delivered through leverage and fiscal efficiency. With an increasing and substantial portion of the revenues being delivered by subscription based products and the trend to longer term contracts, Reed Elsevier will be a more consistent business.
Reed Elsevier aims to distribute 70-80% of free cash flow through dividends and share buybacks. The balance will be invested in the business, mainly through acquisitions, so maintaining capital efficiency aligned to its strategy. Reed Elsevier’s capital will be invested in growth areas which will make sustainable returns in excess of the risk adjusted cost of capital. Reed Elsevier aims to maintain a solid investment-grade credit rating, retaining the balance sheet strength to access the most cost effective sources of borrowing and to support Reed Elsevier’s strategic ambition in evolving publishing and information markets.
This business and financial strategy is directed at delivering good revenue growth, continuous margin improvement, high cash generation, strong adjusted earnings per share growth and growing returns on capital. Our incentive programmes are designed in support of these strategies and in creating shareholder value.