Highlights

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(No Transcript)
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Highlights

• Successful delivery of 3 year strategic programme
• Achievement of 2002 financial targets despite
  economic downturn
• Harcourt makes strong contribution in first full
  year
• On track to meet strategic and financial targets
  for 2003

3
Financial Update

• Mark Armour
• Chief Financial Officer

4
Adjusted Profit And Loss
changeconstant
2001 m
2002m
2001m
2002m
12 months to 31 December
Turnover

4,560
7,342
5,020
7,982
13
Adjusted operating profit

1,594
990
1,133
1,801
17
Operating margin
22
22
23
23
Net interest expense
(229)
(142)
(206)
(327)
Adjusted profit before tax

1,365
848
927
1,474
11
Adjusted figures exclude amortisation of goodwill
and intangible assets and exceptional items
5
Science MedicalRevenues up 29 - adjusted
operating profit up 26 - margin 33.1
Revenues
Adjusted operating profit
m
m
m
m

• Underlying revenues up 6 operating profit up
  11
• Strong renewals, growing online sales, successful
  publishing programme
• Integration of Harcourt mostly complete
• Harcourt STM proforma revenues up 6 operating
  profit up 14

6
LegalRevenues up 5 - adjusted operating profit
up 10 - margin 21.3
Revenues
Adjusted operating profit
m
m

m
m

• Underlying revenues up 4 operating profit up
  11
• Operating margins improved 1.2 points cost
  programmes implemented
• US Legal revenues up 4 online up 8
• Corporate and Federal revenues up 5 strong risk
  solutions
• LexisNexis International solid performance ex
  Latin America

7
EducationRevenues up 78 - adjusted operating
profit up 45 - margin 18.4
Revenues
Adjusted operating profit
m
m
m
m

• Underlying revenues up 2 operating profit up 4
• Harcourt K-12 and Testing proforma revenues up
  2adjusted operating profit up 6
• Strong performance against a market down 5
  integration benefits increasing
• Testing underlying revenues up 8 on strong prior
  yearoperating profit up 25
• Harcourt International underlying revenues flat
  profit down 10

8
BusinessRevenues down 14 - adjusted operating
profit down 4 - margin 16.9
Revenues
Adjusted operating profit
m
m
m
m

• Underlying revenues down 6 operating profit up
  2
• No recovery in advertising markets
• Cost actions taken across the business
• Strong outperformance of market continued share
  gains and yield management
• Exhibitions resilient underlying revenues down
  1 operating profit flat

9
Adjusted Profit Before Tax Reconciliation
change
m
change
m
12 months to 31 December
1,365
848
2001 Adjusted profit before tax
11
150
11
93
Base business (including Harcourt proforma)
-3
(41)
-2
(14)
Currency translation effect
8
1,474
9
927
2002 Adjusted profit before tax
Adjusted figures exclude amortisation of goodwill
and intangibles and exceptional items
10
Adjusted Operating and Free Cash Flow
2001 m
2002 m
2001 m
2002 m
12 months to 31 December
1,620
1,606
1,006
1,010
Adjusted operating cash flow
conversion
85
93
85
93
Before Harcourt
189
79
189
79
Harcourt businesses
102
89
102
89
Total
(184)
(326)
(114)
(205)
Interest
(287)
(245)
(178)
(154)
Tax
1,149
1,035
714
651
Free cash flow before dividends
11
Free Cash Flow
2001 m
2002 m
2001 m
2002 m
12 months to 31 December
1,149
1,035
714
651
Free cash flow before dividends
(411)
(434)
(255)
(273)
Dividends
738
601
459
378
Free cash flow after dividends
(3,694)
(307)
(2,295)
(193)
Acquisition spend
154
168
96
106
Disposals
71
(157)
44
(99)
Other exceptional items
(2,731)
305
(1,696)
192
Total cash inflow/(outflow) before financing
12
Exceptional Items
2001 m
2001 m
2002 m
2002 m
12 months to 31 December
(56)
(67)
(35)
(42)
Reorganisation costs
(102)
(90)
(63)
(57)
Acquisition related costs
(158)
(157)
(98)
(99)
Charged to operating profit
41
(19)
26
(12)
Net (loss)/ profit on sale of businesses and
fixed asset investments
(117)
(176)
(72)
(111)
Exceptional charge before tax
130
194
81
122
Net tax credit
13
18
9
11
Total exceptional credit
13
Adjusted Earnings and Dividends
change constant
Reed Elsevier NV
Reed Elsevier PLC
11
8
0.69
9
28.5p
Adjusted EPS
-
0.30
7
11.2p
Equalised dividends
14
Strategy Execution

• Crispin Davis
• Chief Executive Officer

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Clear and Consistent Strategy
Upgrade organisation effectiveness
Demonstrably superior products
Infill acquisitions/ alliances
Focus on four corebusinesses
Powerful marketing/sales programmes
Strengthen global portfolio
Optimiseoperations/cost efficiency
Substantially increased investment
16
Reed ElsevierKey Objectives 2002

• Maximise above market organic growth from
  four core businesses ?
• Execute and deliver on all strategic
  milestones ?
• Ensure Harcourt achieves growth
  objective complete integration well Mostly
• Improve operating margin further
  through increased efficiency ?
• Deliver double digit earnings growth ?

17
Science Medical2002 Priorities

• Maintain ScienceDirect momentum on key
  performance yardsticks usage,
  penetration and attrition ?
• Deliver on new product initiatives
  programme driving additional revenues ?
• Implement core medical growth strategy ?
• Finalise online medical strategy
  start implementation ?
• Complete Harcourt integration, deliver
  revenue and cost targets ?

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Science MedicalGrowth Momentum - ScienceDirect

• Content increased from 1.8 million to 3.3 million
  articles
• Penetration up 6 percentage points to 72
• Usage up 70 to 86 million article downloads
• Strong growth in e-only sales to 110 million

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Science MedicalScienceDirect Increasing
Usage

• Article downloads (millions)

1999 2000 2001 2002
20
Science MedicalScienceDirect Increasing
Penetration
Aug00 Dec00 Aug01 Dec01 Aug02 Dec02
21
Science MedicalGrowth Momentum Health
Sciences

• Upgrade management effectiveness
• Cohesive market driven organisation
• Strong new management team
• Develop superior products
• Strong new publishing programme
• Investment in product development
• Major upgrade of sales and marketing
• Develop superior online capabilities
• Upgrade of MD Consult (subscribers up 15 sales
  up over 30)
• Launch of PDAs/EVOLVE (e-learning platform)

?
?
?
?
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Science MedicalTurnaround in Health Sciences
Post Acquisition
Pre Acquisition
824
495
Size (m)
6
3
Revenue Growth
Mid 20s
Low 20s
Margin
Double digit
Single digit
Profit Growth
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Science MedicalGrowth Momentum Harcourt

• Acquired business performing well
• 2002 proforma revenue growth accelerated to 6,
  ahead of market
• Margin improvement delivering double digit profit
  growth
• Integration successful
• 40m cost savings target to be exceeded
• More effective organisation driving further
  savings
• Outlook is very encouraging
• Accelerated journals growth within ScienceDirect
• Developing Health Sciences electronic product
• Platform for global expansion, e.g. Holtzbrinck
  STM
• Continuing programme of margin improvement

24
Science MedicalGrowth Momentum

• Strong front list publishing
• Expand digital collections and electronic
  services
• Enhanced navigation and delivery

Superior products

• Focused branding and customer relationships
• Optimum electronic pricing strategies
• Enhance sales force effectiveness

Powerful sales marketing
Global expansion

• Acquisition of national health publishers
• Product geocloning
• Widening distribution

• Complete product rationalisation
• Standardisation of production
• Enhanced systems effectiveness

Cost efficiency
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Legal2002 Priorities

• Further upgrade of electronic product content,
  functionality, customisation to achieve preferred
  product status
• Accelerated growth of online usage monetise
• Maintain competitive position in law schools
• Implement margin improvement programme -
  towards mid-20s target
• Accelerate global expansion geography,
  global platform, branding, organisation

?
?
SEESAW
?
?
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Legal Developing Superior US Legal Products
Navigation Improvements
Improved Company Dossier
Case Law Summaries
New Global Product Platform
Annotated Codes
State by State Customisation
Leading Risk Solution Application
Court Dockete-Filing
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LegalUS Legal Online Usage Growing

• Growth in commercial searches

1999 2000 2001 2002
2002 Online Revenue Growth 8
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LegalGrowth Momentum - Risk Solutions

• Strong growth market increasing concerns over
  fraud, identity theft and national security
• Superior information and risk assessment
  solutions
• Most comprehensive, reliable public records
  database
• Application of advanced data linking and scoring
  technologies
• Revenues up 29 in 2002

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LegalOptimising Cost Efficiency

• Operating Margin

1999 2000 2001 2002
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LegalAccelerating Global Expansion

• Global regional organisation structure in place
• Global delivery platform on target rollout 2003
• Geographic expansion
• Established German operations MBO Verlag
• Acquisition of Quicklaw in Canada
• Acquisition of FactLANE in The Netherlands
• Global brand established

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LegalGrowth Momentum

• More content dockets, codes, summaries
• More functionality e-filing, company dossier,
  risk solutions
• More customisation small law, litigation
  support, One Search

Superior products

• Focus on market segmentation
• Maintain strong law schools programme
• Enhanced sales force effectiveness

Powerful sales marketing
Global expansion

• Rollout of global delivery platform
• Priority countries penetrated/targeted

Cost efficiency

• Margin improvement programme
• Operational/fulfilment improvements

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Education2002 Priorities

• Win greatest share of new K-12 basal
  and supplementary spending US and international
• Win greatest share of new educational testing
  contracts
• Establish strong core competencies
  and focus in electronic product development
  and sales
• Ensure basal/supplementary publishing
  programmes on track for 2003/2004 growth
  
• Organisation appoint division head align
  Harcourt values/culture with Reed Elsevier

?
x
?
?
?
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EducationWinning Performance in 2002 Adoptions
Secondary
Elementary
2
2
Reading/Literature
1
1
Language Arts
4
1
Mathematics
2
1
Social Studies
2
1
Science
Overall 1
Overall 2
Based on estimated share obtained from total
available sales across all adoptions in these
subjects in 2002
34
EducationMarket Outperformance
1998
1999
2000
2001
2002
US Education Market Growth
3
13
8
- 5
12
Harcourt US Education Growth
0
33
4
11
9
Outperform
?
?
?
?
?
Note US Education Market represent total
K-12 textbook sales as reported by Association
of American Publishers (AAP).
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EducationMarket Outperformance

• 1 overall market share in 2002 adoptions
• Good growth in open territories and backlist
• Short term market weakness
• Low point in adoption cycle
• State budget pressures
• Delayed spending in anticipation of federal
  monies
• Investment in e-learning, funded by integration
  savings

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EducationUS K-12 Historic Market Growth
20
15
14
15
13
13
13
12
11
11
10
7
8
6
6
5
5
3
3
2
0
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
-2
-5
-5
-7
-10
Last 20 years Av Growth 6 Last 10 years Av
Growth 7 Last 5 years Av Growth 6
Source AAP Industry Data
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EducationGrowth Momentum Testing

• Good growth on top of exceptional 2001
• New state contract wins
• New assessment publishing
• Stanford Achievement Test 10 launched
• Strong norm reference heritage
• Adaptable to state specific criteria
• California state contract not renewed
• Impact on 2003 revenue growth (approximately
  45m)
• Strong profit performance driven by
• New organisation and management appointments
• Substantial improvement in process efficiency
• Investment in e-assessment stepped up

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Education Growth Momentum

• Proven programme development process
• Expansion across curriculum range
• Building online products e-learning,e-testing,
  e-professional development

Superior products
Powerful sales marketing

• Market research embedded in development and sales
  process
• Strengthen Open Territories sales force

• Appointment of Global CEO to drive strategic
  development
• Product transfer across markets
• Acquisition potential

Global expansion
Cost efficiency

• Greater focus on organisational efficiency
• Further supply chain savings targeted

39
Business2002 Priorities

• Deliver above market revenue growth
  in all key markets
• Further upgrade magazine quality and sales
  effectiveness
• Build more integrated global B2B business
  brands, sectors, customers
• Achieve meaningful margin improvement at
  RBI US
• Drive internet solutions to achieve double
  digit revenue growth

?
?
?
?
?
40
BusinessContinuing Tough Markets
Overall

• Rate of decline now slowed more stable/
  predictable trend no real sign of recovery

US

• Electronics and Manufacturing hardest hit growth
  in Construction and Entertainment

UK

• Technology and Air Transport hardest
  hitrecovery in Agriculture Social Services
  strong

Continental Europe

• Significant sector variation subscription and
  circulation holding up

• Leading shows hold up well Asia Pacific growth
  offset by US Manufacturing weakness 2002 cycling
  broadly neutral

Global Exhibitions
41
BusinessMarket Outperformance

• Leadership positions in almost all sectors
• Geographic and sector spread
• Investment led momentum has built share
• Effective management of costs
• Continued strong online growth

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BusinessMarket Share Gains
RBI US
RBI UK
Gifts Decorative Acc. 6 Laboratory
Equipment 7 Professional Builder 8 Variety -
weekly 9
Caterer Hotelkeeper 4 Estates
Gazette 4 Farmers Weekly 8 Personnel Today 4
RBI Europe
Bouwwereld 8 Elsevier 7 LogistiekKrant 9 Med
isch Contact 8
Based on gain in share of ad pages January -
December 2002 excludes yield effects
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BusinessOnline Revenue Growth

• m

1999 2000 2001 2002
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BusinessGrowth Momentum
Superior products

• Constant product improvement
• New online services

• Disciplined customer feedback programmes
• Market segmentation and yield management
• Enhanced sales force effectiveness

Powerful sales marketing

• Leverage global markets
• Geocloning of titles and shows
• Selective acquisitions

Global expansion
Cost efficiency

• Further supply chain savings
• US margin improvement programme

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The Harcourt AcquisitionDelivering on Criteria

• Strategic
• Higher quality overall portfolio excellent fit
  ?
• Significant boost for Science publishing
  ?
• Global leadership in Medical, with strong growth
  ? potential
• Major position in long term growth US education
  ? market
• Financial
• Acceleration of revenue and profit growth
  ?
• Achieve annual return over WACC within 5 years
  ?
• Earnings accretion ?
• Add to shareholder value (NPV basis) ?

46
Reed ElsevierInternet Revenues

• m/m

1999 2000 2001 2002
47
Reed ElsevierInvestment and Cost Savings

• Continuing investment driving momentum
• Relentless focus on operational efficiency

/ 1999 2000 2001 2002 Investment
80 270 260 290
122 440 419 461 Cost Savings - 143 215 over
350 - 235 346 over 550
48
Reed ElsevierKey Objectives For 2003

• Maximise above market organic growth from four
  core businesses
• Execute and deliver on all strategic milestones

Powerful sales and marketing
Product superiority
Global expansion
Cost efficiency

• Improve operating margin further through
  increased efficiency
• Deliver double digit earnings growth

49
Conclusions
Reed Elsevier strategy proving effective
Strong business fundamentals and financial
position
Strong organic growth across all businesses
compared to market
Harcourt acquisition has acceleratedrevenue and
profit growth
On track to deliver 2003 goals of
above-marketrevenue and double-digit profit
growth
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Appendices
52
Turnover Reconciliation
change
m
change
m
12 months to 31 December
7,342
4,560
2001 Turnover
1
118
1
73
Base businesses (including Harcourt proforma)
Harcourt (2001 full year adj.)
632
14
1,017
14
1
64
1
40
Other acquisitions
-3
(243)
-3
(151)
Disposals
-4
(316)
-3
(134)
Currency translation effect
9
7,982
10
5,020
2002 Turnover
53
Currency ProfileAdjusted Profit Before Tax
Average rates per 1 2001 2002 US
Dollar 1.44 1.50 Euro 1.61 1.59
US Dollar
44
Other
UK
Average rates per 1 2001 2002 US
Dollar 0.89 0.94 Sterling 0.62 0.63
5
Sterling
21
Euro
30
54
Reported Profit Attributable
2001 m
2002 m
2001 m
2002 m
12 months to 31 December
1,005
1,084
624
682
Adjusted profit attributable
(816)
(814)
(507)
(512)
Amortisation of goodwill and intangible assets
13
18
9
11
Exceptional items
202
288
126
181
Reported profit attributable
4.8p
7.0p
Reed Elsevier PLC EPS
0.13
0.18
Reed Elsevier NV EPS
55
Balance Sheet
2001 m
2002 m
2001 m
2002 m
At 31 December
11,026
8,895
6,723
5,814
Goodwill/intangible assets
802
741
489
484
Tangible fixed assets
395
214
241
140
Investments
(727)
(419)
(444)
(274)
Working Capital
11,496
9,431
7,009
6,164
4,784
4,068
2,917
2,659
Shareholders funds
Net debt
5,296
4,180
3,229
2,732
1,416
1,183
863
773
Other net liabilities/minorities
11,496
9,431
7,009
6,164
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Dividend Equalisation
Interim
Final
2002
2001
Change
2002
2001
Change
Reed Elsevier PLC (p)
3.20
3.10
8.00
7.40
8
3
UK tax credit rate
10
10
10
10
Reed Elsevier PLC (gross)(p)
3.56
3.44
8.89
8.22
Equalisation ratio
1.538
1.538
1.538
1.538
Exchange rate ()
1.59
1.63
1.51
1.63
Reed Elsevier NV ()
0.09
0.09
0
0.21
0.21
0
57
This presentation contains forward-looking
statements within the meaning of Section 27A of
the US Securities Act 1933, as amended, and
Section 21E of the US Securities Exchange Act
1934, as amended. These statements are subject
to a number of risks and uncertainties and actual
results and events could differ materially from
those currently being anticipated as reflected in
such forward looking statements. The terms
expect, should be, will be, and similar
expressions identify forward looking statements.
Factors which may cause future outcomes to differ
from those foreseen in forward looking statements
include, but are not limited to general economic
conditions and business conditions in Reed
Elseviers markets exchange rate fluctuations
customers acceptance of its products and
services the actions of competitors
legislative, fiscal and regulatory developments
changes in law and legal interpretation affecting
Reed Elseviers intellectual property rights, and
the impact of technological change.