Thoughts on the Reed Elsevier results presentation today

It’s results season again and one of the biggest business information companies have just announced their results this morning. Reed Elsevier are an organisation that have really gone through the mill over the past couple of years. Let’s remind ourselves of what has happened in this venerable company:

  • 3 Chief Executives – Sir Crispin Davis left this time last year to be replaced by a non-media man, Ian Smith. Ian lasted just 9 months and was replaced by Erik Engstrom the head of the Elsevier division.
  • 1 huge acquisition – Choicepoint at a relative high point in the market
  • 1 failed disposal – the Reed Business Information business was publicly put up for sale, then withdrawn from sale and now seems to be being sold off piecemeal
  • 1 major notes issue – to reduce debt after the acquisition of Choicepoint and failed sale of RBI

Torrid times for any company – even one with a solid range of defensive subscription income.

On the surface of things the results that they announced today seemed not too bad but having listened to their presentation webcast this morning it is easy to see why they have under-performed the sector by 30% since the start of the global downturn.

It is clear that the changing strategy in relation to RBI has been hugely damaging. A business that was already in severe structural decline was left rudderless during the prospective sale. It has then had to radically cut costs in the face of a collapse in revenues (18% down on the year). I would imagine that it has been a brutal time to work there and the continuing uncertainty of headcount reductions, closures and sales cannot be providing a great environment.

Even worse than the performance of RBI has been the downturn in the Reed Exhibitions markets. Here revenue is 22% down on the year which is not really surprising given that a lot of exhibiting companies would have been making re-booking decisions during the high-points of market uncertainty. Erik was keen to emphasise that the problems in exhibitions were cyclical rather than structural. This is partly true but once large companies have taken a decision to drop from major industry shows it is often hard to get them back.

Whilst the poor performance of RBI and RE had been flagged up and was expected, the real underlying concern I picked up from the presentation was the longer term worry about LexisNexis. It wasn’t stated but there seemed to be a general feeling from the Q&A that there were severe competitive pressures on the LexisNexis platform as a result of the Thomson Reuters investment in WestlawNext.  I suspect that this is causing them a lot more concern than they were letting on.

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