Reed Elsevier delivers six per cent increase in H1 profits

25th Jul 2013 08:59

Reed Elsevier has delivered strong growth from its key academic publishing and legal solutions businesses as margins continued their upward trend.These two units helped drive a 6.0% year-on-year increase in adjusted operating profits ahead of consensus forecasts to £870m, as revenues for the Anglo-Dutch group grew 2.0% to £3.03bn. Scientific and academic publishing division Elsevier, by far the group's largest segment, saw profits jump 6%, with the Lexis Nexis risk solutions arm advancing 11%.The rise in profits reflects a further rise in margins to 28.8% from 27.7% in the same period in 2012.In academic publishing, the company said business trends have remained broadly unchanged in the period, with good growth in databases and tools and in primary research submissions and usage across all segments, while revenues from print book sales to individuals and pharma promotion continued to decline.Lexis revenue growth was driven by good new product take-up and higher volumes, with margins benefiting from portfolio changes, while the legal division faced subdued markets in the US and Europe.Chief Executive Officer Erik Engstrom said: "In the first half of 2013 we continued to focus on improving our business profile, primarily through organic development. We invested in building out global technology platforms and launching new products and services. We also made a small number of targeted acquisitions which support our organic growth priorities, and disposed of several businesses that no longer fit our strategy." He acknowledged that the outlook for the macro environment and its impact on customer markets remained "mixed", yet momentum in the business meant he expected the full year to deliver more underlying revenue, profit and earnings growth.The board plans to use the strong balance sheet and cash flow to increase the scale of share buybacks to a total of £600m this year as well as increase the dividend.Chairman Anthony Habgood said: "We are confident that Reed Elsevier remains on track to deliver on its strategic and financial priorities, and we are recommending an 11% increase in the interim dividend for Reed Elsevier PLC and a 2.0% increase for Reed Elsevier NV."Analyst David Reynolds at broker Jefferies observed that recent debate about open access to academic publishing had not yet shown any sign of financial impact on Elsevier thus far, "though the market seems inclined to discount any response from Elsevier in terms of adding incremental value to the scientific publishing process, accessing developing market opportunities, streamlining the publication process etc etc".He added: "As the competitive dynamics in the legal world appear to stabilise, it appears Reed has come through a margin trough and may be able to lift margin further towards historical levels. "We do not think the likelihood of transformational M&A in the sector is high. And whilst one can never say never, it is difficult to see a natural buyer for the Reed Elsevier asset and rather we focus on the organic margin expansion opportunity."Shares in Reed Elsevier were up 3.6% to 830p at 09:40 on Thursday. OH