Reed Elsevier 2009 Investor Presentation

8/14/2019 Reed Elsevier 2009 Investor Presentation

1/45

Issuedon

behalf

of

Reed

Elsevier

PLC

and

Reed

Elsevier

NV

18February2010

REEDELSEVIER2009RESULTSANNOUNCEMENT

Robustfinancialperformanceinunprecedentedglobalrecession

Coreprofessionalinformationrevenueshelduprelativelywell

Advertisingandpromotionmarketssignificantlyimpacted

Costs

reduced

substantially

ExcellentfirstyearprofitgrowthfromChoicePointacquisition

Strongcashgenerationandimprovedfinancialposition

Businesstrendscontinuein2010;longertermprospectsencouraging

ReedElsevier2009

m2008

mChange

%

Changeatconstantcurrencies

%

Revenue 6,071 5,334 +14% 0%

Adjustedoperating

profit

1,570 1,379 +14% +1%

Adjustedoperatingmargin 25.9% 25.9% Reportedoperatingprofit 787 901 13% 22%

Adjustedpretaxprofit 1,279 1,205 +6% 6%

Adjustedoperatingcashflow 1,558 1,407 +11% 2%

Netborrowings 3,931 5,726

ParentCompanies ReedElsevierPLC ReedElsevierNV

2009 2008Change

% 2009 2008Change

%

Adjustedearningspershare 45.9p 44.6p +3% 0.79 0.87 8%

Reportedearningspershare 17.2p 22.1p 22% 0.32 0.44 27%

Ordinarydividendpershare 20.4p 20.3p 0% 0.400 0.404 1%

Adjustedfiguresaresupplementalperformancemeasuresusedbymanagement.Reconciliationsbetweenthereportedandadjustedfiguresaresetoutinnote5totheCombinedFinancialInformationonpage30.

Commentingontheresults,AnthonyHabgood,ChairmanofReedElsevier,said:

Wearepleasedthatour2009resultswererelativelyrobustgiventhedepthoftheglobalrecession. Inaddition,

duringthe

second

half

we

substantially

strengthened

our

balance

sheet

both

through

an

equity

placing

and

throughgoodcashgeneration. InNovember,ErikEngstromtookoverasCEOand,asexpected,hashittheground

running. Thelatecyclenatureofsomeofourmarketsmakesforatoughenvironmentin2010butthe

fundamentalsofourbusinessesarestrong,ourbalancesheetisingoodshapeandnewmanagementisinplace

withthebackground,experienceandambitiontodrivethebusinessforward.


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Reed Elsevier 2009 Results Announcement 2

ReedElseviers

Chief

Executive

Officer,

Erik

Engstrom,

commented:

Ourprofessionalinformationrevenueshelduprelativelywellinwhatwasadifficultyearformostofour

customers. Howeverbusinessesdependentonourcustomersmarketingbudgetswerehithard.

Inthenearterm,someofourcustomermarketsremainunderpressurebutlongertermourprospectsare

encouraging.Wehavehighqualityassetsinattractiveglobalgrowthmarketsandwearefocusingeachbusinesson

itsowntopprioritiesinordertocapturethesegrowthopportunities. AcrossReedElsevierwearecommittedto

deliveringworldclassinformationandtoolsthatenableourcustomerstomakecriticaldecisions,enhance

productivityandimproveoutcomesandthisiscombinedwitharelentlesspursuitofprocessinnovationandcost

efficiency.Iamconvincedthatthesegoalswilldeliverincreasedvalueforourshareholders.

Robustfinancialperformanceinunprecedentedglobalrecession

Coreprofessionalinformationrevenueshelduprelativelywell

Elsevier(44%ofadjustedoperatingprofits)Revenuegrowth+4%,adjustedoperatingprofit+9%,atconstantcurrency

Stronggrowthinelectronicclinicalreference,clinicaldecisionsupportandnursingandhealthprofessional

education;continuedweaknessinpharmapromotion

Solidsciencejournalsubscriptionrenewalsfrom2008supported2009revenuegrowth

LexisNexis(42%ofadjustedoperatingprofits)Revenuegrowth+14%,adjustedoperatingprofit+13%,atconstantcurrency,includingfullyearcontribution

ofChoicePointacquisition

CorelawfirmmarketsflatinUSandmarginallylowerinternationallyreflectingdownturninlegalservices

industry

USdirectorylistingswellbehindprioryear;corporate,governmentandacademicmarketslower

RiskSolutionsseesstronggrowthinInsuranceandGovernmentmarketsbutdeclineinothermarkets;profits

grow

strongly

Advertisingandpromotionmarketssignificantlyimpacted

ReedExhibitions(10%ofadjustedoperatingprofits)Revenues 21%,adjustedoperatingprofits 28%,atconstantcurrency

Lowerspacesalesandfewerpayingdelegatesascorporationscutbackonmarketingspend;netcyclingout

ofbiennialexhibitions


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ReedBusinessInformation(6%ofadjustedoperatingprofits)Revenues 18%,adjustedoperatingprofits 35%,atconstantcurrency

Advertisingmarketsdepressed;subscriptionslessimpacted;growthindataservices

Costsreducedsubstantially

Significantactionsacrossthecostbaseincludingthepreviouslyannouncedrestructuringprogrammes

Underlyingcosts(i.e.excludingacquisitionsanddisposals)were5.4%or227mlower

Adjustedoperatingmarginflat;0.8%pointslowerunderlying,despite6%underlyingrevenuedecline

Excellentfirst

year

profit

growth

from

ChoicePoint

acquisition

Proformarevenues+1%,adjustedoperatingprofits+44%,atconstantcurrency

StrongrevenuegrowthinInsurancebusiness;declinesinemploymentscreeningandothermarkets

StronggrowthinprofitabilitydrivenbyInsurancebusinessandsignificantintegrationbenefits

Strongcashgenerationandimprovedfinancialposition

Conversionofadjustedoperatingprofitintocashat99%

Freecashflowof1,051mbeforerestructuringspendanddividends

829mnetproceedsofequityplacinginJuly2009usedtoreducedebt

Netdebtat31December20093.9bn($6.3bn;4.4bn)

Netdebt/adjustedebitda:2.9x(pensionsandleaseadjusted)(LTMJune2009:3.6x)

Parentcompanyearningspershareanddividends

Adjustedearningspershare+3%to45.9pforReedElsevierPLCand 8%to0.79forReedElsevierNV; 9%at

constantcurrencies

EquityplacinginJuly2009has4%dilutiveeffectonadjustedearningspershare;further4%fullyeareffect

expectedin2010(8%infirsthalf)

Reportedearningspershare 22%to17.2pforReedElsevierPLCand 27%to0.32forReedElsevierNV:

principallyreflectsRBIintangibleassetandgoodwillimpairmentandhigherchargesforintangibleasset

amortisation,exceptionalrestructuringandacquisitionintegration

ReedElsevierPLCfinaldividendflatat15.0p;equalisedReedElsevierNVfinaldividend+1%to0.293. Total

dividendsfor2009+0.5%to20.4pforReedElsevierPLCand 1%to0.400forReedElsevierNV. (Differencein

growthratesintheequaliseddividendsreflectschangesintheeuro:sterlingexchangeratesinceprioryear

dividendannouncementdates)


4/45


Outlook

Asexpected,businesstrendsseeninthesecondhalfarecontinuingin2010,particularlywithregardtolatecycle

effectsinourrelativelyresilientprofessionalmarkets. Advertisingandpromotionandcertainothermarkets,such

asemployeescreening,remaindifficult.Therateofrevenuedeclineis,however,expectedtoslowascomparatives

geteasier. Amodestreductioninadjustedoperatingmarginisexpectedduetoaweakrevenueenvironmentand

increasedinvestmentinlegalmarkets.

Elsevier: Goodgrowthisexpectedtocontinueinelectronicmedicalreference,clinicaldecisionsupport

andhealthprofessions,althoughpharmapromotionremainsweak.Completionofsubscriptionrenewals

for2010iswellprogressed. Academicbudgetpressuresarecontinuing.Loweroverallrevenuegrowthis

expected.

LexisNexis: TrendsinUSlegalandinternationalmarketsareexpectedtocontinue,reflectingpressureson

thelegalindustryandlatecycleeffectsonsubscriptionrevenues. Goodgrowthiscontinuinginthe

insurancesegmentinRiskSolutions.Adjustedoperatingmarginisexpectedtobelower,reflectingaweak

revenueenvironmentandincreasingproduct,marketingandinfrastructurespendinthelegalbusinesses,

partiallymitigatedbycontinuingcostactionsandthegrowingprofitabilityoftheChoicePointbusiness.

ReedExhibitions: Forwardbookingsremaincautiouswithexhibitorscommittinglater.Annualshow

revenuesareexpectedtobelower.2010willseebenefitofnetcyclinginofbiennialshows.

ReedBusiness

Information:

Current

trends

are

expected

to

continue

with

advertising

markets

remaining

difficult,latecycleeffectsmaintainingpressureonprintsubscriptionsandgoodgrowthindataservices.

Revenuesareexpectedtobelowerandreengineeringofportfolioandcostswillcontinue.

Latecycleeffectsarecontinuingin2010andwillbeparticularlysevereinthefirsthalfwhichwillalsosee

dilutionfromtheJuly2009shareplacings. WeareconfidentthatReedElsevierhashighqualityassetsin

attractiveglobalgrowthmarketsandthatthelongertermprospectsareencouraging.

FORWARDLOOKINGSTATEMENTS

ThisresultsannouncementcontainsforwardlookingstatementswithinthemeaningofSection27AoftheUSSecuritiesAct1933,as

amended,andSection21EoftheUSSecuritiesExchangeAct1934,asamended. Thesestatementsaresubjecttoanumberofrisksand

uncertaintiesandactualresultsandeventscoulddiffermateriallyfromthosecurrentlybeinganticipatedasreflectedinsuchforwardlooking

statements. Thetermsexpect,shouldbe,willbeandsimilarexpressionsidentifyforwardlookingstatements. Factorswhichmay

causefutureoutcomestodifferfromthoseforeseeninforwardlookingstatementsinclude,butarenotlimitedto:generaleconomicand

businessconditions;demandforourproductsandservices;competitivefactorsintheindustriesinwhichweoperate;exchangerate

fluctuations;legislative,fiscalandregulatorydevelopments;politicalrisks;terrorism,actsofwarandpandemics;changesinlawandlegal

interpretationsaffectingReedElseviersintellectualpropertyrightsandinternetcommunications;theimpactoftechnologicalchange;and

otherrisksreferencedfromtimetotimeinthefilingsofReedElsevierPLCandReedElsevierNVwiththeUSSecuritiesandExchange

Commission.

ENQUIRIES: SybellaStanley(Investors)

+44(0)20

7166

5630

PatrickKerr(Media)

+44(0)20

7166

5646


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Operatingandfinancialreview

OPERATINGREVIEW

% %

2009m

2008m

Change%

2009m

2008m

Change%

Changeatconstant

currenciesUnderlying

growthrates

Revenue

Elsevier 1,985 1,700 +17% 2,223 2,142 +4% +4% +4%

LexisNexis 2,557 1,940 +32% 2,864 2,444 +17% +14% 4%

ReedExhibitions 638 707 10% 715 891 20% 21% 22%

ReedBusinessInformation 891 987 10% 998 1,244 20% 18% 18%

Total 6,071 5,334 +14% 6,800 6,721 +1% 0% 6%

AdjustedoperatingprofitElsevier 693 568 +22% 776 716 +8% +9% +9%

LexisNexis

665

513

+30% 745 646 +15%

+13%15%

ReedExhibitions 152 183 17% 170 230 26% 28% 31%

ReedBusinessInformation 89 126 29% 99 159 38% 35% 34%

Unallocateditems (29) (11) (32) (14)

Total 1,570 1,379 +14% 1,758 1,737 +1% +1% 9%

Adjustedfiguresaresupplementalmeasuresusedbymanagement. Reconciliationsbetweenthereportedandadjusted

figuresaresetoutinnote5tothecombinedfinancialinformationonpage30.Thereportedoperatingprofitfiguresareset

outinnote2onpage26.

Unlessotherwiseindicated,allpercentagemovementsinthefollowingcommentaryrefertoperformanceatconstantexchangerates.Underlyinggrowthratesarecalculatedatconstantcurrencies,excludingacquisitionsanddisposals.Constantcurrency

growth

rates

are

based

on

2008

full

year

average

and

hedge

exchange

rates.

Elsevier

% %

2009m

2008m

Change%

2009m

2008m

Change%


Underlyinggrowthrates

Revenue

Science&Technology 985 848 +16% 1,103 1,068 +3% +5% +5%

HealthSciences 1,000 852 +17% 1,120 1,074 +4% +3% +3%

1,985

1,700

+17% 2,223 2,142 +4%

+4%

+4%

Adjustedoperatingprofit 693 568 +22% 776 716 +8% +9% +9%

Adjustedoperatingmargin 34.9% 33.4% 1.5pts 34.9% 33.4% 1.5pts

Elsevierhadarelativelyrobustyear.Inachallengingacademicbudgetenvironment,thejournalsbusiness

entered2009withgoodsubscriptionrenewalsfrom2008. InHealthSciences,growingonlinesalesinmedical

reference,clinicaldecisionsupportandnursingandhealthprofessionaleducationwerepartlyheldbackbyweak

pharmapromotionmarkets.Adjustedoperatingmarginsimprovedthroughsignificantrestructuringandcost

actions.

Revenuesandadjustedoperatingprofitsincreasedby4%and9%respectivelyatconstantcurrencies,bothbefore

andafterminoracquisitions. Costgrowthwaslimitedto1%throughsignificantcostsavings,including: the

streamliningof

business

processes

in

shared

services;

the

continued

ramp

up

of

journal

and

book

production

operationsinourChennaifacility;thefurtheroutsourcingofITdevelopmentandbackofficeactivities,including

applicationmanagementandfinancialtransactionprocessing;theconsolidationofactivities,includingtechnology

operationsandrealestate;andmoreeffectiveleveragingofglobalprocurement.


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Thereported

operating

margin,

after

amortisation

of

acquired

intangible

assets

and

exceptional

restructuring

costs,was28.4%,up2.3percentagepoints.

Science&Technologysawrevenuegrowthof5%atconstantcurrencies.ThiswasdrivenbygoodScienceDirect

subscriptionrenewalsenteringtheyear.OnlineusageofScienceDirectcontinuedtogrowcloseto20%.TheScopus

abstractandindexingdatabasesawstronggrowthinsubscriptionsandwasexpandedthroughtheadditionofnew

contentinthehumanities.Goodgrowthinebooksandotheronlinetransactionalsaleswereoffsetbylowerprint

booksalesreflectingtightercustomerbudgetsandchanneldestocking.

InHealthSciences,revenueswereup3%atconstantcurrencies. Strongperformancesinmedicalresearch,nursing

andhealthprofessionaleducation,andinclinicaldecisionsupportwereinparttemperedbycontinuingweakness

inpharma

promotion

markets.

Pharma

promotion

and

other

advertising

revenues,

which

accounted

for

approximately20%ofHealthSciencesrevenues,weredown7%,reflectingfewerblockbusterdruglaunchesanda

reductioninthemarketingbudgetsofpharmaceuticalcompanies.Excludingpharmapromotionandother

advertising,revenueswere5%aheadatconstantcurrencies.Thegrowthinmedicalresearchreflectsgrowing

onlinesubscriptionstomedicalcontent. Innursingandhealthprofessionaleducation,stronggrowthwasachieved

throughtheincreasingdemandforhealthcareprofessionals,newpublishing,andthefurtherdevelopmentand

increasingpenetrationofonlineresources. Doubledigitgrowthwasseeninclinicaldecisionsupportwithgrowing

demandforonlineworkflowsolutionsthatcombinecontentwithpredictiveanalytics. Inclinicalreference,strong

growthinMDConsultandotheronlinereferenceproductswasoffsetbylowerprintbooksales.

Elsevierhascontinueditslongstandingcommitmenttoinnovationandnewproductdevelopment. Inscientific

andmedical

research,

the

focus

is

on

building

out

new

content

and

data

sets

and

increasing

the

functionality

of

crossdisciplineanddisciplinespecificresearchanddiscoverytools. Institutionalplanningandperformancetools

arealsobeingdevelopedtohelpimproveeconomicoutcomesforresearchersandacademicleaders. Additionally

inHealthSciencesthereisparticularfocusonincreasingtherangeandsophisticationofourclinicaldecision

supportsolutionstomakehealthcaremoreefficientandtoimprovemedicaloutcomes.

For2010,goodmomentumisexpectedinhealthsciencesfromthecontinuedgrowthinthehealthprofessionsand

theincreasingadoptionofonlineresources,althoughpharmapromotionandotheradvertisingrevenuesremain

weak.Academicbudgetpressuresareexpectedtocontinue. Overallrevenuegrowthisexpectedtobelowerfor

theyear.


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LexisNexis % %

2009m

2008m

Change%

2009m

2008m

Change%

Change

atconstantcurrencies


Revenue

USLegal 1,126 1,017 +11% 1,261 1,281 2% 6% 6%

International 566 545 +4% 634 687 8% 3% 1%

RiskSolutions 865 378 +129% 969 476 +104% +95% 2%

2,557 1,940 +32% 2,864 2,444 +17% +14% 4%

Adjustedoperatingprofit 665 513 +30% 745 646 +15% +13% 15%


LexisNexishadachallengingyear. ThecorelawfirmbusinesswasflatintheUSandmarginallylower

internationallyreflectingthedownturninthelegalindustrywhilstUSdirectorylistingswerewellbehindthe

prioryearasfirmscutbackondirectoryspend. Corporate,governmentandacademicmarketswerelower.

ChoicePointmadeanexcellentcontributioninitsfirstyear,growingitsprofitsstronglyandboostingoverall

revenuesandprofits. Adjustedoperatingmarginswereslightlylowerduetotheunderlyingrevenuedecline

largelymitigatedbyfurtherrestructuringandcostactionsandthestronggrowthinChoicePointprofitability.

Revenuesandadjustedoperatingprofitsincreasedby14%and13%respectivelyatconstantcurrenciesincludinga

firstfullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008. ExcludingChoicePointand

minoracquisitionsanddisposals,underlyingrevenuesandadjustedoperatingprofitsweredown4%and15%

respectively.

Theoverall

adjusted

operating

margin

was

0.4

percentage

points

lower

at

26.0%

reflecting

the

underlyingrevenuedeclineandincreasesinspendingonnewproductdevelopment,salesandmarketingand

operationalsupport,largelymitigatedbythefurtherrestructuringandcostactions,andtheincreasingprofitability

ofChoicePoint.

Costsavingsinclude: thefullyearbenefitoftheconsolidationin2008oftheCorporateandPublicMarkets

businesswithUSLegalaswellastheconsolidationofUSoperations;continuedoutsourcingofsystemsengineering

andmaintenance,softwaredevelopmentengineering,datafabrication,andotherproductionactivities;thefurther

consolidationandstreamliningoftechnologyoperationsandrealestate;moreeffectiveleveragingofglobal

procurement;streamliningofthescreeningbusinessinRisk;andconsolidationofactivitiesontheintegrationof

ChoicePoint.

Thereportedoperatingmargin,afteramortisationofacquiredintangibleassetsandexceptionalrestructuringand

acquisitionintegrationcosts,was13.2%,down1.8percentagepoints,reflectingintangibleassetamortisationof

theChoicePointacquisitionandacquisitionintegrationcosts.

TheUSLegalbusinesssawrevenuesdecline6%atconstantcurrencies,or4%beforechangesinrevenue

recognitioninMartindaleHubbell,largelydrivenbyweaknessincorporate,governmentandacademicmarketsand

cutbacksbylawfirmsondirectoryspend. Thecorelawfirmbusinessheldupwell,withrevenuesflat,despitethe

significantimpactoftheeconomicdownturnonthelegalindustry.Thisreflectsthecontinuingdemandforlegal

researchinformationservicesandgrowthinworkflowsolutionsparticularlyinlitigationservices.

TheMartindale

Hubbell

lawyer

directory

listings

business

saw

revenues

down

17%

on

alike

for

like

basis

as

law

firmscutbackondirectorymarketing. InrecognitionofMartindaleHubbellstransformationintoawebmarketing

servicescompany,alllistingrevenuesin2009havebeenattributedtotheonlinelistingsandrecognisedrateably


8/45



overthe

listing

period;

print

directories

are

no

longer

provided

except

as

separately

ordered

by

customers.

The

changeintimingofrevenuerecognitionhasaonetimeadverseeffectin2009.

Goodprogressisbeingmadeindevelopingthenextgenerationoflegalresearchproducts,andtheadvancedback

officeinfrastructuretosupportthem,todeliveranintegratedandsuperiorcustomerexperienceacrosslegal

research,workflowtools,practicesolutionsandclientdevelopment. Progressiveproductintroductionsoverthe

nextfewyearswillcombineadvancedtechnologywithenrichedcontentandsophisticatedanalyticsand

applications. LexisNexisgoalistodelivernotjustbettersearchresults,butbetteroutcomesforcustomers.In

addition,salescoverageisbeingexpandedandmoreintuitiveuserinterfacesandexpandedlitigationworkflow

toolsarebeingaddedtothecurrentoffering. Thiswillresultinahigherongoinglevelofcapitalexpenditureand

lowermarginthroughcontinuingdevelopmentspendandwilloverthelongertermdrivegrowthandoperational

efficiencies.

Government,corporateandacademicmarketswere6%lowerwithcustomerbudgetsunderpressureandreduced

transactionalactivity,impactinginparticularthenewsandbusinessinformationdatabases.

TheLexisNexisInternationalbusiness,iethenonUSbusinesses,sawrevenuesdecline3%atconstantcurrencies,or

1%underlyingbeforetakingaccountofthesaleintheprioryearoftheLatinAmericanbusiness. Thepressureson

thelegalservicesindustryinternationallymirrorthoseseenintheUS,particularlyintheUKwiththeimpactmostly

onprintproductsalesascustomersincreasinglyrelyontheonlineservice. Withlesspenetrationofonlineservices

ininternationalmarketsthanintheUS,onlinerevenueshavecontinuedtogrowstronglyat9%asfirmsseekto

increasetheireffectiveness. Thishaslargelybeenoffsetbythedeclineinprintsales.

TheRiskSolutionsbusinesssawrevenuesalmostdoubleatconstantcurrenciesincludingafullyearcontributionof

theChoicePointbusinessacquiredinSeptember2008. Underlyingrevenues,beforeChoicePoint,were2%lower

reflectingtheslowdownintransactionalactivityintheUSeconomy,largelyoffsetbystronggrowthingovernment

markets.

TheChoicePointbusinesssawrevenuesup1%onaproformabasiswithadjustedoperatingprofitsup44%,

deliveringafirstyearposttaxreturnof6.0%onthe$4.1billionpurchase. Strongrevenuegrowthintheinsurance

segment,up10%,wasdrivenbyhightransactionalactivityinautoandpropertyinsurancemarketsandby

increasingsalesofmorepowerfuldataandanalyticsproducts. Thisstronggrowthininsuranceandcostsavings

fromtheintegrationofChoicePointandLexisNexisdrivetheincreasedprofitability. The1%proformarevenue

growthis

after

a13%

decline

in

the

non

insurance

businesses,

principally

in

pre

employment

screening,

reflecting

theeconomicdownturn. Significantcostactionsinthescreeningbusinesslimitedtheprofitimpactofthisdecline.

ThebusinesstrendsseeninUSlegalandinternationalmarketsareexpectedtocontinueinto2010reflectingthe

continuingpressuresonthelegalindustryandthesubscriptionnatureofmuchoftherevenue. Goodgrowth

momentumisexpectedintheinsurancesegmentinRiskSolutionsandscreeningmarketsshouldstabiliseastheUS

economyrecovers. Theoveralladjustedoperatingmarginisexpectedtobelower,reflectingtheeffectsofaweak

revenueenvironmentandincreasesinspendonproductdevelopment,infrastructure,andsalesandmarketingin

theLegalbusiness,partlymitigatedbycontinuingcostactionsandthegrowingprofitabilityoftheChoicePoint

business.


9/45



ReedExhibitions

% %

2009m

2008m

Change%

2009m

2008m

Change%

Changeatconstant

currenciesUnderlying

growthrates

Revenue 638 707 10% 715 891 20% 21% 22%

Adjustedoperatingprofit 152 183 17% 170 230 26% 28% 31%


ReedExhibitionshadadifficultyearwithcustomerscuttingbackonpromotionalexpenditureandthenetcycling

outofbiennialexhibitions. Therevenuedecline,mitigatedinpartbysubstantialcostsavings,hasreduced

adjustedoperatingmargins.

Revenuesandadjustedoperatingprofitsweredown21%and28%respectivelyatconstantcurrencies,or22%and

31%beforeminorportfoliochanges. Adjustedforbiennialshowcycling,underlyingrevenuesandadjusted

operatingprofitswere13%and18%lowerrespectively. Significantcostsavingsweremadethroughmanagement

streamlining,operationalefficienciesandheadcountreductionsacrossthebusiness. Theoperatingmargin,after

amortisationofacquiredintangibleassetsandexceptionalrestructuringcosts,was17.9%,down0.8percentage

points,beforegoodwillimpairmentchargesoncertainminorshows.

Salesofexhibitionspaceandancillaryserviceswereloweracrossallmajorgeographies. Therewasalsoadecline

inpayingdelegatesatthesmallnumberofshowswhichchargesignificantfeesforparticipation. Acrossthe

regions,annualshowrevenueswere14%lowerintheUS,13%inJapan,and17%inEurope. Theshowsoverall

havehoweverbeensuccessfulwithattendancesremainingresilientandstrongsatisfactionexpressedbyexhibitorsandvisitors.

Whilst2010willseethebenefitofthenetcyclinginofbiennialshows,bookingsgoingintotheyearremain

cautiouswithexhibitorscommittinglaterthanusualandrevenuesfromannualshowsareexpectedtobelower.

ReedBusinessInformation

% %

2009m

2008m

Change%

2009m

2008m

Change%



Revenue

UK 263 306 14% 295 386 24% 15% 16%

US 246 288 15% 275 363 24% 27% 27%

NL 198 202 2% 222 254 13% 13% 13%

International 184 191 4% 206 241 15% 14% 13%

891 987 10% 998 1,244 20% 18% 18%

Adjustedoperatingprofit 89 126 29% 99 159 38% 35% 34%


ReedBusinessInformationhadaverytoughyearwithadvertisingmarketsseverelyimpactedbytheeconomic

recession. Printsubscriptionrevenuesdeclinedlessanddataservicessawgoodgrowth. Adjustedoperating

marginswerelowerduetotherevenuedeclinepartlymitigatedbysubstantialcostsavings.

Revenuesandadjustedoperatingprofitswere18%and35%lowerrespectivelyatconstantcurrencies,or18%and

34%beforeacquisitionsanddisposals. Totalunderlyingcostswere15%lowerdrivenbysubstantialcostsavings.


10/45



Theoperatingmargin,afteramortisationofacquiredintangibleassetsandrestructuringcosts,wasnegative2.4%

beforeimpairmentcharges,down8.0percentagepointsreflectingtherevenuedeclineandsignificantlyhigherexceptionalrestructuringcosts.

Overalladvertisingrevenues(47%ofRBIrevenues)weredown29%,withonlineadvertisingrevenuesdown14%

andprintadvertisingrevenuesdownsubstantiallymoreat37%. Printsubscriptionandotherrevenuesdeclined

10%. Incontrast,dataservicesrevenues(17%ofRBIrevenues)grew10%.

ThecontrolledcirculationmagazinesandcertainotherprinttitlesintheUS,accountingfor47%ofUSrevenues,

arebeingsold,restructuredinanticipationofsaleorclosed. Varietyandtheentertainmentgroup,RCD(ReedConstructionData),andtheBuyerZoneleadgenerationbusinessarebeingretained. Thesebusinessessawrevenuesdecline16%.

Theimperativeistocontinuerestructuringthemagazinesbusinessandtheadvertisingdrivenportfolio;toalign

thecostbasewithreducedrevenueexpectations;andtofurthergrowthedataservicesbusiness.

Advertisingmarketsremaindifficultandlatecycleeffectscontinuetoputpressureonsubscriptions.Dataservices

continuetogrowwell. 2010willbeanotherdifficultyearforRBIwithfurtherrevenuedeclines.


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FINANCIALREVIEW

REEDELSEVIERCOMBINEDBUSINESSES

CurrencyTheaverageexchangeratesintheyearsawtheUSdollarstrongeragainstbothsterlingandtheeuro,whilsttheeurowasstrongeragainststerling. Thisgivesafavourableeffectontranslationofreportedresultsexpressedinsterlingwithrelativelyminoreffectswhenexpressedineuros.Reportedfigures

%

2009m

2008m

Change%

2009m

2008m

Change%

Changeatconstant

currencies

Reportedfigures

Revenue 6,071 5,334 +14% 6,800 6,721 +1% +0%

Reportedoperatingprofit 787 901 13% 881 1,135 22% 22%

Reportedpretaxprofit 435 617 29% 487 777 37% 36%

Reportedprofitattributable 391 476 18% 438 587 25% 26%(Thereportedfiguresincludeamortisationandimpairmentofacquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,disposalsandothernonoperatingitems,relatedtaxeffectsandmovementsindeferredtaxassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm.AdjustedfiguresthatexcludetheseitemsareusedbyReedElsevierasadditionalperformancemeasuresandarediscussedlaterbelow.)Revenuewas6,071m/6,800m(2008:5,334m/6,721m),up14%expressedinsterlingandup1%whenexpressedineuros,

includingafullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008. Atconstantexchangerates,

revenuewasflatcomparedwiththeprioryear. Underlyingrevenues,iebeforeacquisitionsanddisposals,were6%lower

principallyreflectingtheimpactoftheglobalrecessiononourmarkets,mostparticularlythesignificantdownturnin

advertisingandpromotionmarketsinReedExhibitionsandReedBusinessInformation(RBI).

Reportedoperatingprofit,afteramortisationandimpairmentofacquiredintangibleassetsandgoodwillandexceptional

restructuringandacquisitionrelatedcosts,was787m/881m(2008:901m/1,135m),down13%insterlingand22%in

euros.ThedecreaseprincipallyreflectsintangibleassetandgoodwillimpairmentchargesrelatingtoRBIandincreased

restructuringandacquisitionintegrationspend,partlyoffsetinsterlingbycurrencytranslationeffects.

Theamortisation

charge

in

respect

of

acquired

intangible

assets,

including

the

share

of

amortisation

in

joint

ventures,

amountedto368m/412m(2008:281m/354m),up87m/58masaresultofChoicePointandother2008acquisitions

and,insterling,currencytranslationeffects.Chargesforimpairmentofacquiredintangibleassetsandgoodwillwere

177m/198m(2008:9m/11m)principallyrelatingtoRBIandcertainminorexhibitionsbusinesses.

Exceptionalrestructuringcostsincurredamountedto182m/204m(2008:152m/192m)relatingtothemajorrestructuring

programmesannouncedinFebruary2008and2009andincludedseverance,outsourcingmigrationandrelatedvacant

propertycosts. Acquisitionrelatedcostsamountedto48m/54m(2008:27m/34m)principallyinrespectofthe

integrationoftheChoicePointbusinessintoLexisNexis.

Disposalsandothernonoperatinglossesof61m/68m(2008:92m/116m)compriserestructuringcostsinrelationto

assetsheldforsaleandrelatedclosures,inparticularRBIUScontrolledcirculationtitles,lessnetgainsondisposalsofminor

titlesand

investments

and

fair

value

increases

in

the

portfolio

of

venture

capital

investments.

Netfinancecostswerehigherat291m/326m(2008:192m/242m,including18m/23mofacquisitionrelatedfees

incurredinconnectionwithChoicePointacquisitionfinancing)principallyreflectingafullyearsfinancingoftheChoicePoint

acquisitionand,insterling,currencytranslationeffects,lessthebenefitoftheJuly2009shareplacingandfreecashflow.


12/45



Thereported

profit

before

tax,

including

amortisation

and

impairment

of

acquired

intangible

assets

and

goodwill,

exceptional

restructuringandacquisitionrelatedcosts,andnonoperatingitems,was435m/487m(2008:617m/777m).

Thereportedtaxchargewaslowerat40m/45m(2008:155m/195m)reflectingthereducedreportedprofitbeforetax,

geographicmixeffects,taxcreditsonpriorperioddisposalsof34m/38mandthefullyeardeferredtaxcrediton

amortisationofthedeferredtaxliabilityestablishedonacquisitionofChoicePointinrelationtoitsintangibleassets.

DiscontinuedoperationsNetprofitfromdiscontinuedoperationsof18m/10mintheprioryearcomprisedthegainondisposaloftheremaining

EducationDivisionbusinessesof67m/72mlesstaxesof49m/62m.

TotaloperationsThereportedattributableprofitof391m/438mcompareswith476m/587min2008,reflectingthelowerreportedprofit

beforetaxpartlymitigatedbylowertaxcostsand,insterling,currencytranslationeffects.

Adjustedfigures

%

2009m

2008m

Change%

2009m

2008m

Change%


Adjustedfigures

Adjustedoperatingprofit 1,570 1,379 +14% 1,758 1,737 +1% +1%

Adjustedoperatingmargin 25.9% 25.9% 25.9% 25.9%Adjustedpretaxprofit 1,279 1,205 +6% 1,432 1,518 6% 6%

Adjustedprofitattributable 982 919 +7% 1,099 1,159 5% 5%

Adjustedoperatingcashflow 1,558 1,407 +11% 1,745 1,773 2% 2%

Cashflowconversion 99% 102% 99% 102%

(AdjustedfiguresareusedbyReedElsevierasadditionalperformancemeasuresandarestatedbeforetheamortisationandimpairmentofacquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,and,inrespectofearnings,reflectataxratethatexcludestheeffectofmovementsindeferredtaxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm.ExceptionalrestructuringcostsrelatetothemajorrestructuringprogrammesannouncedinFebruary2008and2009.Acquisitionrelatedcostsrelatetoacquisitionintegrationandfeesincurredinconnectionwithacquisitionfinancing. Profitandlossondisposalsandothernonoperatingitemsarealsoexcludedfromtheadjustedfigures.Reconciliationsbetweenthereportedandadjustedfiguresaresetoutinnote5tothecombinedfinancialinformation.Comparisonatconstantexchangeratesuses2008fullyearaverageandhedgeexchangerates.)Adjustedoperatingprofitwas1,570m/1,758m(2008:1,379m/1,737m),up14%expressedinsterlingandup1%ineuros,

includingafullyearcontributionfromtheChoicePointbusinessacquiredinSeptember2008.Atconstantexchangerates,

adjustedoperatingprofitswereup1%.Underlyingadjustedoperatingprofits,iebeforeacquisitionsanddisposals,were9%

lowerreflectingtheoperationalgearingonunderlyingrevenuedeclinesof6%. Underlyingcostswere227m/254mlower

thanin2008or5.4%,atconstantcurrencies,throughsignificantcostactionsacrossthebusinessincludingtheexceptional

restructuringprogrammes.

Theoveralladjustedoperatingmarginwasunchangedat25.9%(2008:25.9%). Anunderlyingmargindeclineof0.8percentage

pointswaslargelyoffsetbythestronggrowthinprofitabilityandadjustedoperatingmarginatChoicePoint.

Thenet

pension

expense

was

18m/20m

(2008:

36m/46m).

Excluding

the

unallocated

net

pension

financing

credit,

the

netpensionexpensewaslowerat24m/27m(2008:75m/95m),reflectingthehigherdiscountratesandlowerinflation

assumptionsatthebeginningoftheyearcomparedwiththeprioryearandpensioncurtailmentcreditsof43m/48marising

fromchangestopensionplanbenefitsandstaffreductions,partiallyoffsetinsterlingbycurrencytranslationeffects.Thenet


13/45



pensionfinancingcreditwas6m/7m(2008:39m/49m)reflectingthelowermarketvalueofschemeassetsatthe

beginningof

the

year

compared

with

ayear

before.

The

charge

for

share

based

payments

was

17m/19m

(2008:

46m/58m)reflectingreducedvestingassumptionsforlongtermincentiveschemes.Restructuringcosts,otherthanin

respectoftheexceptionalrestructuringprogrammeandacquisitionintegration,were20m/22m(2008:13m/16m).

Netinterestexpensewas291m/326m(2008:174m/219mbeforeacquisitionrelatedfinancingfees)principallyreflectinga

fullyearsfinancingoftheChoicePointacquisitionand,insterling,currencytranslationeffects,lessthebenefitoftheJuly2009

shareplacingandfreecashflow.

Adjustedprofitbeforetaxwas1,279m/1,432m(2008:1,205m/1,518m),up6%expressedinsterlinganddown6%when

expressedineuros.Atconstantexchangerates,adjustedprofitbeforetaxwas6%lowerreflectingtheflatadjustedoperating

profitperformanceandhighernetinterestexpense.

Theeffective

tax

rate

on

adjusted

profit

before

tax

at

22.9%

was

marginally

lower

than

the

rate

in

2008

reflecting

financing

efficienciesandgeographicmixeffects.Theeffectivetaxrateonadjustedprofitbeforetaxexcludesmovementsindeferred

taxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenearterm,andmorecloselyalignswithcashtaxcosts.

Adjustedoperatingprofitsandtaxationaregrossedupfortheequityshareoftaxesinjointventures.

Theadjustedprofitattributabletoshareholdersof982m/1,099m(2008:919m/1,159m)wasup7%expressedinsterling

and5%lowerineuros.Atconstantexchangerates,adjustedprofitattributabletoshareholderswasdown5%.

Cashflows

Adjustedoperatingcashflowwas1,558m/1,745m(2008:1,407m/1,773m),up11%whenexpressedinsterlingand2%

lowerineuros,ordown2%atconstantcurrencies.

Therateofconversionofadjustedoperatingprofitsintocashflowwasveryhighat99%(2008:102%).Thesmalldeclinein

adjustedoperatingcashflowatconstantcurrenciesreflectsthe1%increaseinadjustedoperatingprofitsatconstant

currenciesandtheslightlylowercashflowconversionratethantheprioryearsrecordlevel.

Capitalexpenditureincludedwithinadjustedoperatingcashflowwas242m/271m(2008:172m/217m),including

164m/184m(2008:115m/145m)inrespectofcapitaliseddevelopmentcostsincludedwithininternallygenerated

intangibleassets.TheincreasereflectsafullyearofChoicePointcapitalexpendituresandincreasedinvestmentinproduct

platformsandrelatedinfrastructure,and,insterling,currencytranslationeffects.

Freecashflowafterinterestandtaxationwas1,051m/1,177m(2008:999m/1,259m)beforeexceptionalrestructuring

andacquisitionrelatedspend. Theincreaseinsterlingreflectsthecurrencytranslationbenefitincludedinadjustedoperating

cashflow,

partially

offset

by

higher

interest

payments.

When

expressed

in

euros,

the

decrease

reflects

the

higher

interest

paymentsandthesmalldeclineinadjustedoperatingcashflow.

Exceptionalrestructuringspendwas124m/139m(2008:72m/91m)principallyrelatingtoseverance,outsourcing

migrationandvacantpropertycosts. Paymentsmadeinrespectofacquisitionintegrationamountedto45m/51m(2008:

27m/34m)principallyinrespectoftheChoicePointacquisition. Taxpaidintheyearwasreducedby36m/40m(2008:

32m/40m)inrelationtotherestructuringandacquisitionrelatedspend.

Ordinarydividendspaidtoshareholdersintheyear,beingthe2008finaland2009interimdividends,amountedto

457m/512m(2008:418m/528m). In2008,thespecialdistributionpaidtoshareholdersinJanuary2008fromthenet

proceedsoftheEducationDivisiondisposalamountedto2,013m/2,690m(including27m/35mpaidtotheemployee

benefittrust).

Freecashflowafterdividendsandexceptionalrestructuringandacquisitionintegrationspendwas461m/515m(2008:

496m/625m). Spendonacquisitionswas94m/105m,including56m/63mofpaymentsinrespectofChoicePoint

changeofcontrolandothernonoperatingliabilitiesassumedonacquisition,and29m/32minrespectofdeferred

considerationonprioryearacquisitions. Includingdeferredconsiderationpayable,anamountof17m/19mwascapitalised


14/45



intheyearasacquiredintangibleassetsand6m/7masgoodwill. Thetotalconsiderationinrespectofacquisitionsmadein

theyear

was

9m/10m.

Tax

paid

in

the

year

was

reduced

by

53m/59m

in

relation

to

settlement

of

outstanding

ChoicePoint

shareoptionsonacquisitionandotherliabilities.

Proceeds,netofexpenses,fromshareplacingsbytheparentcompaniesinJuly2009were829m/928m. Noshare

repurchasesweremadebytheparentcompaniesintheyear(2008:40m/50m)andnosharesoftheparentcompanieswere

purchasedbytheemployeebenefittrust(2008:54m/68m).Netproceedsfromtheexerciseofshareoptionswere5m/6m

(2008:54m/68m).

Debt

Netborrowingsat31December2009were3,931m/4,402m(2008:5,726m/5,898m),adecreaseof1,795m/1,496m

since31December2008. ThedecreaseprincipallyreflectstheJuly2009shareplacings,whichraised829m/928mnetof

expenses,free

cash

flow

and

currency

translation

effects.

Expressed

in

sterling,

currency

translation

effects

decreased

net

borrowingsby559m,reflectingtheimpactoftheweakeningoftheUSdollar,from$1.45:1atthebeginningoftheyearto

$1.62:1attheend,onthelargelyUSdollardenominatednetdebt. Expressedineuros,currencytranslationdifferences

decreasednetdebtby112m,largelyreflectingtheimpactoftheweakeningofthedollar,from$1.41:1atthebeginningof

theyearto$1.44:1attheend.

Grossborrowingsafterfairvalueadjustmentsat31December2009amountedto4,706m/5,270m(2008:

6,142m/6,326m).Thefairvalueofrelatedderivativeassetswas41m/46m(2008:41m/42m).Cashbalancestotalled

734m/822m(2008:375m/386m).

Asat31December2009,aftertakingintoaccountinterestrateandcurrencyderivatives,atotalof75%ofReedElseviers

grossborrowings(equivalentto90%ofnetborrowings)wereatfixedrateswithaweightedaverageremaininglifeof5.7years

andinterest

rate

of

6.0%.

Netpensionobligations,iepensionobligationslesspensionassets,at31December2009were235m/263m(2008:

369m/380m).Thedecreasereflectstheimpactofhigherplanassetvalues,pensionbenefitcurtailmentsandcurrency

translationpartiallyoffsetbytheeffectsoflowerdiscountratesandanincreasedinflationassumptionintheUKscheme.

Theratioofnetdebttoadjustedebitda(earningsbeforeinterest,tax,depreciationandamortisation)at31December2009

was2.2x(2008:2.7x,proformaforChoicePoint),and2.9x(LTMJune2009:3.6x;2008:3.3x;proformaforChoicePoint)ona

pensionsandleaseadjustedbasis. ReedElsevierstargetisaratioofnetdebttoadjustedebitdaof2.03.0x(onapensions

andleaseadjustedbasis)overthelongerterm,consistentwithasolidinvestmentgradecreditrating.

Liquidity

Fixedratetermdebtof$1,500m,600mand300mandfloatingratetermdebtof50m,totalling1,836m/2,056m,were

issuedintheyearinmaturitiesrangingfrom4to10years,withaweightedaveragecouponof7.5%(beforetakinginto

accountfixedtofloatinginterestrateswaps),andtheproceedsusedtorepaythemajorityoftheChoicePointacquisition

facility,beingbankloansmaturingin2010and2011. ThenetproceedsoftheJuly2009equityplacingswereusedtorepaythe

outstandingChoicePointacquisitionfacilityandreduceshorttermcommercialpaperborrowings.

At31December2009,ReedElsevierhadinplacea$2.5bncommittedbankfacilitymaturinginMay2010,providingbackup

forcommercialpaperborrowingsandothershorttermdebt,noneofwhichwasdrawn,anda$2.0bncommittedbankfacility,

forwardstartinginMay2010andmaturinginMay2012. InJanuary2010the$2.5bncommittedfacilitymaturinginMay2010

wascancelledandthestartdateofthe$2.0bncommittedfacilitybroughtforwardtostartimmediately. Thisbackupfacility

providessecurityoffundingfor$2.0bnofshorttermdebttoMay2012.

Aftertakingaccountofthesecommittedbankfacilitiesandavailablecashresources,noborrowingsmaturein2010and2011,

730m/817mofborrowingsmaturein2012and3,201m/3,585mmaturein2013andbeyond.Thestrongfreecashflowof

thebusiness,theavailableresourcesandbackupfacilities,andReedElseviersabilitytoaccessdebtcapitalmarketsare

expectedtoprovidesufficientliquiditytorepayorrefinanceborrowingsastheymature.


15/45



Capitalemployed

and

returns

Thecapitalemployedat31December2009was11,918m/13,348m (2008:13,125m/13,470m)afteraddingback

accumulatedamortisationandimpairmentofacquiredintangibleassetsandgoodwill. Thedecreaseof1,207m/122m

principallyreflectstheimpactofcurrencytranslationatyearendrates.

Thereturnonaveragecapitalemployedintheyearwas10.4%(2008:12.1%). Thisisbasedonadjustedoperatingprofitsfor

theyear,lesstaxattheeffectiverate,andtheaverageofthecapitalemployedatthebeginningandendoftheyear,

retranslatedattheaverageexchangerates,adjustedformajoracquisitiontimingandtoexcludethegrossuptogoodwillin

respectofdeferredtaxliabilitiesestablishedonacquisitionsinrelationtointangibleassets. Thereductioninthereturn

reflectstheinitiallydilutiveeffectonreturnsoftheChoicePointacquisitionandtheloweradjustedoperatingprofitsinthe

businessexcludingChoicePoint.

Acquisitionstypicallydilutetheoverallreturninitially,butbuildtodeliverlongertermreturnswelloverReedElseviers

averageforthebusiness. Therecentacquisitionsmadeintheyears2007and2008aredeliveringposttaxreturnsin2009of

10%and6%respectively. TheposttaxreturnonChoicePointwas6%intheyear,whichcompareswith4%intheprioryearon

aproformabasis.

PARENTCOMPANIES

ReedElsevierPLC ReedElsevierNV

2009pence

2008pence

Change%

2009

2008

Change%

Adjustedearningspershare 45.9p 44.6p +3% 0.79 0.87 8%

Reportedearnings

per

share

17.2p

22.1p

22%

0.32 0.44

27%

Ordinarydividendpershare 20.4p 20.3p 0% 0.400 0.404 1%

Fortheparentcompanies,ReedElsevierPLCandReedElsevierNV,adjustedearningspersharewererespectivelyup3%at

45.9p(2008:44.6p)anddown8%at0.79(2008:0.87). Atconstantratesofexchange,theadjustedearningspershareof

bothcompaniesdecreasedby9%.

TheJuly2009equityplacingshadadilutiveeffectonadjustedearningspershareofapproximately4%in2009,takinginto

accounttheinterestexpensesavedontheborrowingsrepaidfromtheproceedsoftheequityplacingsandtheincreaseinthe

averagenumberofparentcompanysharesinissue.Thefurtherdilutiveeffectonadjustedearningspersharein2010is

expectedtobeapproximately4%(8%inthefirsthalf).

Thereported

earnings

per

share

for

Reed

Elsevier

PLC

shareholders

was

17.2p

(2008:

22.1p)

and

for

Reed

Elsevier

NV

shareholderswas0.32(2008:0.44).Thedeclineprincipallyreflectstheintangibleassetandgoodwillimpairmentchargesin

RBI,higherexceptionalrestructuringandacquisitionintegrationcosts,andthedilutiveeffectoftheequityplacing.

Theequalisedfinaldividendsproposedare15.0ppershareforReedElsevierPLCand0.293pershareforReedElsevierNV,

unchangedandup1%respectivelycomparedwiththeprioryear.Thisgivestotaldividendsfortheyearof20.4p(2008:20.3p)

and0.400(2008:0.404),up0.5%anddown1%on2008respectively. Thedifferenceingrowthratesintheequalised

dividendsreflectschangesintheeuro:sterlingexchangeratesinceprioryeardividendannouncementdates.

Dividendcover,basedonadjustedearningspershareandthetotalinterimandproposedfinaldividendsfortheyear,is2.3

timesforReedElsevierPLCand2.0timesforReedElsevierNV. Thedividendpolicyoftheparentcompaniesis,subjectto

currencyconsiderations,togrowdividendsbroadlyinlinewithadjustedearningspersharewhilstmaintainingdividendcover

(beingthe

number

of

times

the

annual

dividend

is

covered

by

the

adjusted

earnings

per

share)

of

at

least

two

times

over

the

longerterm.

InJuly2009,ReedElsevierPLCplaced109.2mordinarysharesat405ppershareforproceeds,netofissuecosts,of435m

(487m)andReedElsevierNVplaced63.0mordinarysharesat7.08persharefornetproceedsof441m(394m). The


16/45



numbersofordinarysharesissuedrepresented9.9%oftheissuedordinarysharecapitaloftherespectiveparentcompanies

priorto

the

placings.

On18January2008,aspecialdistributionwaspaidtoshareholdersintheequalisationratiorepresentingthenetproceedsof

thesaleoftheEducationdivision. Thedistributionwas82.0ppershareforReedElsevierPLCand1.767pershareforReed

ElsevierNVandamountedto2,013m/2,690minaggregate. Thespecialdistributionwasaccompaniedbyaconsolidationof

theordinarysharecapitalsofReedElsevierPLCandReedElsevierNVonthebasisof58newordinarysharesforevery67

existingordinaryshares,representinga13.4%consolidationofordinarysharecapitalofbothcompanies.

Noshareswererepurchasedintheyear.Sharesrepurchasedintheprioryeartotalled3.2mordinarysharesofReedElsevier

PLCand2.1mordinarysharesofReedElsevierNV.


17/45


PrincipalRisks

TheprincipalrisksfacingReedElsevierarisefromthehighlycompetitiveandrapidlychangingnatureofourmarkets,the

increasinglytechnological

nature

of

our

products

and

services,

the

international

nature

of

our

operations,

legislative,

fiscal

and

regulatorydevelopments,andeconomicconditionsinourmarkets.Certainbusinessescouldalsobeaffectedbytheimpacton

publiclyfundedandothercustomersofchangesinfundingandbycyclicalpressuresonadvertisingandpromotionalspending

orthroughtheavailabilityofalternativefreesourcesofinformation.

ReedElsevierhasestablishedriskmanagementpracticesthatareembeddedintotheoperationsofthebusinessesbasedon

theframeworkininternalcontrolissuedbytheCommitteeofSponsoringOrganisationsoftheTreadwayCommission(COSO),

andarereviewedbytheAuditCommitteesandBoards.Importantspecificrisksthathavebeenidentifiedandarebeing

addressedinclude:

Demandforourproductsandservicesmaybeimpactedbyfactorsbeyondourcontrolsuchastheeconomicenvironment

intheUnitedStatesandothermajoreconomies.Macroeconomic,politicalandmarketconditionsmayadverselyaffect

theavailability

of

short

and

long

term

funding,

volatility

of

interest

rates,

currency

exchange

rates

and

inflation.

ReedElseviersbusinessesaredependentonthecontinuedacceptancebyourcustomersofourproductsandservicesand

thevalueplacedonthem.Wecannotpredictwhethertherewillbechangesinthefuturewhichwillaffectthe

acceptabilityofourproducts,servicesandpricestoourcustomers.

Ourbusinessesoperateinhighlycompetitivemarkets.Thesemarketscontinuetochangeinresponsetotechnological

innovations,changinglegislation,regulatorychanges,theentranceofnewcompetitorsandotherfactors.Wecannot

predictwithcertaintythechangesthatmayoccurandtheeffectofthosechangesonthecompetitivenessofour

businesses.Wecontinuetoinvestsignificantresourcestofurtheradapttothechangingmarketandcompetitive

environment.Thereisnoassurancethatthisinvestmentwillproducesatisfactorylongtermreturns.

ReedElseviers

businesses

are

increasingly

dependent

on

electronic

platforms

and

networks,

primarily

the

internet,

for

deliveryofproductsandservices.Althoughplansandproceduresareinplacetoreducesuchrisks,ourbusinessescould

beadverselyaffectediftheirelectronicdeliveryplatformsandnetworksexperienceasignificantfailure,interruption,or

securitybreach.

Ourproductsandservicesarelargelycomprisedofintellectualpropertycontentdeliveredthroughavarietyofmedia. We

relyontrademark,copyright,patentandotherintellectualpropertylawstoestablishandprotectourproprietaryrightsin

theseproductsandservices.Thereisariskthatourproprietaryrightscouldbechallenged,limited,invalidatedor

circumvented.

Anumberofourbusinessesrelyextensivelyuponcontentanddatafromexternalsourcestomaintainourdatabases.Dataisobtainedfrompublicrecords,governmentalauthorities,customersandotherinformationcompanies,includingcompetitors.Thedisruptionorlossofdatasourcesinthefuture,becauseofchangesinthelaworbecausedatasuppliersdecidenottosupplythem,couldadverselyaffectourbusinessifwewereunabletoarrangeforsubstitutesourcesinatimelymanneroratall.

Thescientific,technicalandmedical(STM)primarypublicationsofElsevier,likethoseofmostofourSTMcompetitors,are

publishedonapaidsubscriptionbasis.Therehasbeendebateinthegovernment,academicandlibrarycommunities,

whicharetheprincipalcustomersforourSTMpublications,regardingwhethersuchpublicationsshouldbefunded

insteadthroughfeeschargedtoauthorsandfromgovernmentalandothersubsidiesormadefreelyavailableaftera

periodfollowingpublication.IfthesemethodsofSTMpublishingarewidelyadoptedormandated,itcouldadversely

affectourrevenuefrompaidsubscriptionpublications.

Neworganisationalandoperationalstructuresarebeingdevelopedwithincreasedfocusonoutsourcingandoffshoring

functions.Thefailureofthirdpartiestowhomwehaveoutsourcedactivitiescouldadverselyaffectourbusiness

performance,reputation

and

financial

condition.

Weoperateanumberofpensionschemesaroundtheworld,thelargestschemesbeingofthedefinedbenefittypeinthe

UK,theUSandtheNetherlands.Theassetsandobligationsassociatedwithdefinedbenefitpensionschemesare


18/45


PrincipalRisks

particularlysensitivetochangesinthemarketvaluesofassetsandthemarketrelatedassumptionsusedtovaluescheme

liabilities.

Ourbusinessesoperateinover200locationsworldwideandourearningsaresubjecttotaxationinmanydiffering

jurisdictionsandatdifferingrates.Weseektoorganiseouraffairsinataxefficientmanner,takingaccountofthe

jurisdictionsinwhichweoperate.However,taxlawsthatapplytoReedElsevierbusinessesmaybeamendedbythe

relevantauthorities.Suchamendments,ortheirapplicationtoReedElsevierbusinesses,couldadverselyaffectour

reportedresults.

Weoftenacquireanddisposeofbusinessestoreshapeandstrengthenourportfolioandengageinrestructuringactivities.

Ifweareunabletogeneratetheanticipatedbenefitssuchasrevenuegrowth,synergiesand/orcostsavingsassociated

withtheseacquisitionsandrestructuringactivitiesthiscouldadverselyaffectourreputationandfinancialcondition.

Ifthe

ratings

of

our

long

term

debt

are

downgraded

in

the

future,

our

borrowing

costs

and

access

to

capital

may

be

adverselyaffected.Aratingisbaseduponinformationfurnishedbyusorobtainedbytherelevantratingagencyfromitsownsourcesandissubjecttorevision,suspensionorwithdrawalbytheratingagencyatanytime.Ratingagenciesmayreviewtheassignedratingsduetodevelopmentsthatarebeyondourcontrol.

TheReedElseviercombinedfinancialstatementsareexpressedinpoundssterlingandare,therefore,subjecttomovementsin

exchangeratesonthetranslationofthefinancialinformationofbusinesseswhoseoperationalcurrenciesareotherthan

sterling.TheUnitedStatesisourmostimportantmarketand,accordingly,significantfluctuationsintheUSdollarexchange

ratecouldsignificantlyaffectourreportedresults.


19/45


Combinedfinancialinformation

Combinedincome

statement

Fortheyearended31December2009

2009m

2008m

2009

m2008

m

Revenuecontinuingoperations 6,071 5,334 6,800 6,721

Costofsales (2,252) (1,916) (2,523) (2,414)

Grossprofit 3,819 3,418 4,277 4,307

Sellinganddistributioncosts (1,112) (1,053) (1,246) (1,327)

Administrationandotherexpenses (1,935) (1,482) (2,167) (1,868)

Operatingprofitbeforejointventures 772 883 864 1,112

Shareofresultsofjointventures 15 18 17 23

Operatingprofitcontinuingoperations 787 901 881 1,135

Financeincome 7 33 8 42

Financecosts (298) (225) (334) (284)

Netfinancecosts (291) (192) (326) (242)

Disposalsandothernonoperatingitems (61) (92) (68) (116)

Profitbeforetaxcontinuingoperations 435 617 487 777

Taxation (40) (155) (45) (195)

Netprofitfromcontinuingoperations 395 462 442 582

Netprofitfromdiscontinuedoperations 18 10

Netprofitfortheyear 395 480 442 592

Attributableto:

Parentcompaniesshareholders 391 476 438 587

Noncontrolling

interests

4 4

4 5


Adjustedprofitfiguresarepresentedinnotes2and5asadditionalperformancemeasures.


20/45



Combinedstatement

of

comprehensive

income


2009

m2008

m

2009m

2008m


Exchangedifferencesontranslationofforeignoperations (122) 340 (50) 59

Cumulativeexchangedifferencesondisposalofforeignoperations 27 54

Actuarialgains/(losses)ondefinedbenefitpensionschemes 6 (347) 7 (437)

Fairvaluemovementsonavailableforsaleinvestments (9) (11)

Cumulativefair

value

movements

on

disposal

of

available

for

sale

investments 1 1

Fairvaluemovementsoncashflowhedges 53 (243) 59 (306)

Transfertonetprofitfromhedgereserve(netoftax) 84 (14) 94 (18)

Taxrecogniseddirectlyinequity (25) 156 (28) 196

Othercomprehensive(expense)/income fortheyear (3) (90) 83 (463)

Totalcomprehensiveincomefortheyear 392 390 525 129

Attributableto:

Parentcompaniesshareholders 388 386 521 124

Noncontrollinginterests 4 4 4 5

Totalcomprehensiveincomefortheyear 392 390 525 129


21/45



Combinedstatement

of

cash

flows


2009

m2008

m 2009

m2008

m

Cashflowsfromoperatingactivitiescontinuingoperations Cashgeneratedfromoperations 1,604 1,452 1,796 1,830

Interestpaid (302) (222) (338) (280)

Interestreceived 9 43 10 54

Taxpaid (120) (215) (134) (271)

Netcashfromoperatingactivities 1,191 1,058 1,334 1,333

Cashflowsfrominvestingactivitiescontinuingoperations

Acquisitions (94) (2,161) (106) (2,747)

Purchasesofproperty,plantandequipment (78) (57) (87) (72)

Expenditureoninternallydevelopedintangibleassets (164) (115) (184) (145)

Purchaseofinvestments (3) (4) (3) (5)

Proceedsfromdisposalsofproperty,plantandequipment 4 5 4 6

(Netcosts)/proceedsofotherdisposals (2) 8 (2) 10

Dividendsreceivedfromjointventures 23 23 26 29

Netcashusedininvestingactivities (314) (2,301) (352) (2,924)

Cashflowsfromfinancingactivitiescontinuingoperations

Dividendspaidtoshareholdersoftheparentcompanies (457) (2,404) (512) (3,183)

Distributionstononcontrollinginterests (3) (3)

Increase/(decrease)in

bank

loans,

overdrafts

and

commercial

paper 107 (407)

120

(513)

Issuanceofotherloans 1,807 2,373 2,024 3,017

Repaymentofotherloans (2,862) (411) (3,206) (520)

Repaymentoffinanceleases (2) (56) (2) (71)

Redemptionofdebtrelatedderivativefinancialinstruments 62 78

Proceedsonissueofordinaryshares 834 54 934 68

Purchaseoftreasuryshares (94) (118)

Netcashusedinfinancingactivities (576) (883) (645) (1,242)

Netcashusedindiscontinuedoperations (48) (33)

Increase/(decrease)incashandcashequivalents 301 (2,174) 337 (2,866)

Movement

in

cash

and

cash

equivalents

Atstartofyear 375 2,467 386 3,355

Increase/(decrease)incashandcashequivalents 301 (2,174) 337 (2,866)

Exchangetranslationdifferences 58 82 99 (103)

Atendofyear 734 375 822 386

Adjustedoperatingcashflowfiguresarepresentedinnote5asadditionalperformancemeasures.


22/45



Combinedstatement

of

financial

position

Asat31December2009

2009

m2008

m

2009m

2008m

Noncurrentassets

Goodwill 4,339 4,901 4,860 5,048

Intangibleassets 3,632 4,404 4,068 4,536

Investmentsinjointventures 135 145 151 149

Otherinvestments 41 49 46 51

Property,plantandequipment 292 329 327 339

Netpension

assets

110 152 123

157

Deferredtaxassets 208 353 233 363

8,757 10,333 9,808 10,643

Currentassets

Inventoriesandprepublicationcosts 275 348 308 358

Tradeandotherreceivables 1,492 1,685 1,671 1,736

Derivativefinancialinstruments 71 76 79 78

Cashandcashequivalents 734 375 822 386

2,572 2,484 2,880 2,558

Assetsheldforsale 5 49 6 50

Totalassets 11,334 12,866 12,694 13,251

Currentliabilities

Tradeand

other

payables

2,471 2,769 2,768

2,852

Derivativefinancialinstruments 102 258 114 266

Borrowings 678 448 759 461

Taxation 479 554 536 571

Provisions 134 79 150 81

3,864 4,108 4,327 4,231

Noncurrentliabilities

Borrowings 4,028 5,694 4,511 5,865

Deferredtaxliabilities 1,272 1,525 1,425 1,570

Netpensionobligations 345 521 386 537

Provisions 61 35 69 36

5,706 7,775 6,391 8,008

Liabilitiesassociatedwithassetsheldforsale 5 2 6 2

Totalliabilities 9,575 11,885 10,724 12,241

Netassets 1,759 981 1,970 1,010

Capitalandreserves

Combinedsharecapitals 225 209 252 215

Combinedsharepremiums 2,807 2,529 3,144 2,605

Combinedsharesheldintreasury (698) (783) (782) (806)

Translationreserve (100) (14) 79 174

Othercombinedreserves (502) (988) (753) (1,207)

Combinedshareholdersequity 1,732 953 1,940 981

Noncontrollinginterests 27 28 30 29

Totalequity 1,759 981 1,970 1,010

ApprovedbytheboardsofReedElsevierPLCandReedElsevierNV,17February2010.


23/45



CombinedstatementofchangesinequityFor

the

year

ended

31

December

2009

Combinedsharecapitals

Combinedshare

premiums

Combinedsharesheldin

treasuryTranslation

reserve

Othercombined

reserves

Combinedshareholders

equity

Noncontrolling

interests Total equitym m m m m m m m

Balanceat1January2009 209 2,529 (783) (14) (988) 953 28 981

Totalcomprehensiveincomefor

theyear

(122) 510 388 4 392

Dividendsdeclared (457) (457) (3) (460)

Issueofordinaryshares,net

ofexpenses

20 395 419 834 834

Increasein

share

based

remunerationreserve

17

17

17

Settlementofshareawards 57 (60) (3) (3)

Exchangedifferenceson

translationofcapitaland

reserves (4) (117)

28

36

57

(2) (2)

Balanceat31December2009 225 2,807 (698) (100) (502) 1,732 27 1,759


Combinedshare

premiums


treasuryTranslation

reserve

Othercombined

reserves


equity

Noncontrolling

interests Total equity

m

m m m m m

m

mBalanceat1January2008 197 2,143 (619) (145) 1,389 2,965 11 2,976

Totalcomprehensiveincome

fortheyear 367 19

386 4 390

Dividendsdeclared (2,404) (2,404) (2,404)


ofexpenses 1 53

54 54

Increaseinsharesheldin

treasury

(94)

(94) (94)

Increaseinsharebased

remunerationreserve

46

46 46

Settlementofshareawards 8 (8)

Acquisitions 11 11


translationof

capital

and

reserves 11 333

(78)

(236)

(30)

2 2

Balanceat31December2008 209 2,529 (783) (14) (988) 953 28 981


24/45



CombinedstatementofchangesinequityFor

the

year

ended

31

December

2009


Combinedshare

premiums


treasuryTranslation

reserve

Othercombined

reserves


equity

Noncontrolling

interests Total equitym m m m m m m m

Balanceat1January2009 215 2,605 (806) 174 (1,207) 981 29 1,010


fortheyear

(50) 571 521 4 525

Dividendsdeclared (512) (512) (3) (515)


ofexpenses

22 442 470 934 934

Increasein

share

based

remunerationreserve

19

19

19

Settlementofshareawards 64 (67) (3) (3)


translationofcapitaland

reserves 15 97 (40) (45) (27)

Balanceat31December2009 252 3,144 (782) 79 (753) 1,940 30 1,970


Combinedshare

premiums


treasuryTranslation

reserve

Othercombined

reserves


equity

Noncontrolling

interests Total equity

m

m m m m m

m

mBalanceat1January2008 268 2,914 (842) (170) 1,862 4,032 15 4,047


fortheyear

113

11

124 5 129

Dividendsdeclared (3,183) (3,183) (3,183)


ofexpenses 1 67

68 68

Increaseinsharesheldin

treasury (118)

(118) (118)

Increaseinsharebased

remunerationreserve

58

58 58

Settlementofshareawards 10 (10)

Acquisitions 14 14


translationof

capital

and

reserves (54) (376)

144

231

55

(5)

(5)

Balanceat31December2008 215 2,605 (806) 174 (1,207) 981 29 1,010


25/45


Notestothecombinedfinancialinformation

1

Basisof

preparation

TheReedElseviercombinedfinancialinformation(thecombinedfinancialinformation)representsthecombinedinterestsoftheReed

ElsevierPLCandReedElsevierNVshareholdersandencompassesthebusinessesofReedElsevierGroupplcandElsevierReedFinanceBV

andtheirrespectivesubsidiaries,associatesandjointventures,togetherwiththetwoparentcompanies,ReedElsevierPLCandReed

ElsevierNV(ReedElsevierorthecombinedbusinesses).

Thecombinedfinancialinformation,presentedincondensedform,hasbeenabridgedfromtheauditedcombinedfinancialstatementsfor

theyearended31December2009,whichhavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)as

adoptedbytheEuropeanUnionandasissuedbytheInternationalAccountingStandardsBoard.TheReedElsevieraccountingpoliciesunder

IFRSaresetoutintheReedElsevierAnnualReportsandFinancialStatements2008onpages88to92,exceptasdescribedbelow. The

combinedfinancialinformationhasbeenpreparedinaccordancewiththoseaccountingpolicies.Financialinformationispresentedinboth

sterlingandeuros.

Inthe

2009

financial

year,

IAS1

Presentation

of

Financial

Statements

(revised

2007),

IFRS8

Operating

Segments

and

amendments

to

IAS23BorrowingCostscameintoforceandhaveaccordinglybeenadoptedbyReedElsevier.IAS1(revised)hasresultedintherenamingof

certainoftheprimaryfinancialstatementsandrequiresthatthecombinedstatementofchangesinequityshowsthechangesineach

componentofequity.IFRS8requiresoperatingsegmentstobeidentifiedonabasisconsistentwithinternalmanagementstructureand

reporting,andhasnotresultedinachangetothesegmentspresented.IAS23requiresborrowingcoststhataredirectlyattributabletothe

acquisition,construction,orproductionofaqualifyingassettobecapitalisedandhasnotledtoanyborrowingcostsbeingcapitalisedinthe

yearended31December2009.Additionally,anumberofotherinterpretationsandotherminorrevisionstoaccountingstandardshavebeen

adoptedthatdonothaveasignificantimpactonReedElseviersaccountingpoliciesandreporting.

ThedirectorsofReedElsevierPLCandReedElsevierNV,havingmadeappropriateenquiries,considerthatadequateresourcesexistforthe

combinedbusinessestocontinueinoperationalexistencefortheforeseeablefutureandthat,therefore,itisappropriatetoadoptthegoing

concernbasisinpreparingthecombinedfinancialinformationfortheyearended31December2009.


26/45



2

Segmentanalysis

AdjustedoperatingprofitisoneofthekeysegmentalprofitmeasuresusedbyReedElsevierinassessingperformance. Adjustedoperating

profitisdefinedasoperatingprofitbeforetheamortisationandimpairmentofacquiredintangibleassetsandgoodwillandexceptional

restructuringandacquisitionrelatedcosts,andisgrosseduptoexcludetheequityshareoftaxesinjointventures. Adjustedfiguresare

reconciledtothereportedfiguresinnote5.

Revenuecontinuingoperations

2009

m2008

m

2009m

2008m

Businesssegment

Elsevier 1,985 1,700 2,223 2,142

LexisNexis

2,557 1,940 2,864

2,444ReedExhibitions 638 707 715 891

ReedBusinessInformation 891 987 998 1,244

Total 6,071 5,334 6,800 6,721

Geographicalorigin

NorthAmerica 3,228 2,544 3,615 3,206

UnitedKingdom 897 905 1,005 1,140

TheNetherlands 662 594 742 748

RestofEurope 851 893 953 1,125

Restofworld 433 398 485 502

Total 6,071 5,334 6,800 6,721

Geographicalmarket

NorthAmerica 3,310 2,624 3,707 3,306

UnitedKingdom

513 580 575

731


RestofEurope 1,132 1,136 1,268 1,431


Total 6,071 5,334 6,800 6,721

Adjustedoperatingprofitcontinuingoperations

2009

m2008

m

2009m

2008m

Businesssegment

Elsevier

693 568 776

716LexisNexis 665 513 745 646

ReedExhibitions 152 183 170 230

ReedBusinessInformation 89 126 99 159

Subtotal 1,599 1,390 1,790 1,751

Corporatecosts (35) (50) (39) (63)

Unallocatednetpensionfinancingcredit 6 39 7 49

Total 1,570 1,379 1,758 1,737

Geographicalorigin

NorthAmerica 777 618 870 779

UnitedKingdom 257 239 288 301


RestofEurope 212 237 237 299

Restof

world

81 79 91

99

Total 1,570 1,379 1,758 1,737


27/45



2 Segmentanalysiscontinued

Operatingprofitcontinuingoperations

2009

m2008

m

2009m

2008m

Businesssegment

Elsevier 563 443 631 558

LexisNexis 337 291 377 367

ReedExhibitions 79 123 88 155

ReedBusinessInformation (163) 55 (183) 69

Subtotal

816 912 913

1,149

Corporatecosts (35) (50) (39) (63)

Unallocatednetpensionfinancingcredit 6 39 7 49

Total 787 901 881 1,135

Geographicalorigin

NorthAmerica 252 334 282 421

UnitedKingdom 183 183 205 231


RestofEurope 95 151 106 189


Total 787 901 881 1,135

Theunallocatednetpensionfinancingcreditof6m/7m(2008:39m/49m)comprisestheexpectedreturnonpensionschemeassetsof

189m/212m(2008:

219m/276m)

less

interest

on

pension

scheme

liabilities

of

183m/205m

(2008:

180m/227m).

Shareofposttaxresultsofjointventuresof15m/17m(2008:18m/23m)includedinoperatingprofitcomprises4m/5m(2008:

4m/5m)relatingtoLexisNexis,10m/11m(2008:14m/18m)relatingtoReedExhibitionsand1m/1m(2008:nil)relatingtoReed

BusinessInformation.

3 Discontinuedoperations

DiscontinuedoperationscomprisetheresultsoftheEducationdivision,thedisposalofwhichwascompletedinJanuary2008withthesaleof

theeducationalassessmentbusiness. ThedisposaloftheUSK12SchoolsEducationandInternationalbusinesseshadcompletedin2007.

Netprofitfromdiscontinuedoperations

2009

m2008

m

2009

m2008

m

Revenue 12 15

Operatingcosts (12) (15)

Operatingprofitandprofitbeforetax

Taxation

Profitaftertaxation

Gainondisposals 67 72

Taxondisposals (49) (62)

Netprofitfromdiscontinuedoperations 18 10


28/45



3

Discontinuedoperations

continued

Cashflowsfromdiscontinuedoperations

2009

m2008

m

2009m

2008m

Netcashflowfromoperatingactivities 2 3

Netcashflowusedininvestingactivities (50) (36)

Netcashflowfromfinancingactivities

Netmovementincashandcashequivalents (48) (33)

Netcashflowfrominvestingactivitiesfortheyearended31December2008includedcashproceeds,netofexpenses,onthecompleted

disposalsof

270m/367m

and

taxes

paid

on

completed

disposals

of

320m/403m.

4 Combinedstatementofcashflows

Reconciliationofoperatingprofitbeforejointventurestocashgeneratedfromoperationscontinuingoperations

2009

m2008

m

2009m

2008m

Operatingprofitbeforejointventures 772 883 864 1,112

Amortisationofacquiredintangibleassets 364 278 408 350

Impairmentofacquiredintangibleassetsandgoodwill 169 9 189 11

Amortisationof

internally

developed

intangible

assets

139 88 156

111

Depreciationofproperty,plantandequipment 84 79 94 100

Sharebasedremuneration 17 46 19 58

Totalnoncashitems 773 500 866 630

Movementinworkingcapital 59 69 66 88

Cashgeneratedfromoperations 1,604 1,452 1,796 1,830

Reconciliationofnetborrowings

Cash&cash

equivalents

m Borrowings

m

Relatedderivative

financial

instruments

m 2009

m 2008

m

Atstartofyear 375 (6,142) 41 (5,726) (492)

Increase/(decrease)incashandcashequivalents 301 301 (2,174)

Decrease/(increase)inborrowings 950 950 (1,499)

Redemptionofdebtrelatedderivativefinancialinstruments (62)

Changesresultingfromcashflows 301 950 1,251 (3,735)

Borrowingsinacquiredbusiness (219)

Inceptionoffinanceleases (26) (26) (1)

Fairvalueadjustments 7 4 11 2

Exchangetranslationdifferences 58 505 (4) 559 (1,281)

Atendofyear 734 (4,706) 41 (3,931) (5,726)


29/45



4

Combinedstatement

of

cash

flows

continued

Reconciliationofnetborrowings

Cash&cashequivalents

mBorrowings

m

Relatedderivative

financialinstruments

m2009

m2008

m

Atstartofyear 386 (6,326) 42 (5,898) (669)

Increase/(decrease)incashandcashequivalents 337 337 (2,866)

Decrease/(increase)inborrowings 1,064 1,064 (1,913)

Redemptionof

debt

related

derivative

financial

instruments

(78)

Changesresultingfromcashflows 337 1,064 1,401 (4,857)

Borrowingsinacquiredbusiness (279)

Inceptionoffinanceleases (29) (29) (1)

Fairvalueadjustments 8 4 12 3

Exchangetranslationdifferences 99 13 112 (95)

Atendofyear 822 (5,270) 46 (4,402) (5,898)

Netborrowingscomprisecashandcashequivalents,loancapital,financeleases,promissorynotes,bankandotherloans,andthose

derivativefinancialinstrumentsthatareusedtohedgethefairvalueoffixedrateborrowings.

Borrowingsbyyearofrepayment

2009

m2008

m

2009m

2008m

Within1year 678 448 759 461

Within1to2years 349 1,707 390 1,758

Within2to3years 437 1,885 490 1,942

Within3to4years 640 578 717 595

Within4to5years 779 104 872 107

After5years 1,823 1,420 2,042 1,463

After1year 4,028 5,694 4,511 5,865

Total 4,706 6,142 5,270 6,326

Fixedratetermdebtof$1,500m,600mand300mandfloatingratetermdebtof50m,totalling1,836m/2,056m,wereissuedinthe

yearand

used

to

repay

$2.8bn

of

amounts

outstanding

on

the

ChoicePoint

acquisition

facility.

The

term

debt

was

issued

in

4,

5,

8and

10

yearmaturities.

Shorttermbankloans,overdraftsandcommercialpaperwerebackedupat31December2009bya$2,500m(1,548m/1,734m)

committedbankfacilitymaturinginMay2010,whichwasundrawn,anda$2,000m(1,238m/1,387m)committedbankfacility,forward

startinginMay2010andmaturinginMay2012.InJanuary2010the$2,500mcommittedfacilitymaturinginMay2010wascancelledand

thestartdateofthe$2,000mcommittedfacilitybroughtforwardtostartimmediately.Thisbackupfacilityprovidessecurityoffundingfor

$2,000mofshorttermdebttoMay2012.


30/45



5

Adjustedfigures

ReedElsevierusesadjustedfiguresaskeyperformancemeasures.Adjustedfiguresarestatedbeforeamortisationandimpairmentof

acquiredintangibleassetsandgoodwill,exceptionalrestructuringandacquisitionrelatedcosts,disposalgainsandlossesandothernon

operatingitems,relatedtaxeffectsandmovementsindeferredtaxationassetsandliabilitiesthatarenotexpectedtocrystalliseinthenear

term.Adjustedoperatingprofitisalsogrosseduptoexcludetheequityshareoftaxesinjointventures.Exceptionalrestructuringcostsrelate

tothemajorrestructuringprogrammesannouncedinFebruary2008and2009. Acquisitionrelatedcostsrelatetoacquisitionintegration

andfeesincurredinconnectionwithacquisitionfinancing.Adjustedoperatingcashflowismeasuredafterdividendsfromjointventuresand

netcapitalexpenditurebutbeforepaymentsinrelationtoexceptionalrestructuringandacquisitionrelatedcosts.Adjustedfiguresare

derivedasfollows:

2009

m2008

m 2009

m2008

m

Operating

profit

continuing

operations 787 901 881

1,135Adjustments:



Exceptionalrestructuringcosts 182 152 204 192

Acquisitionrelatedcosts 48 27 54 34

Reclassificationoftaxinjointventures 8 9 9 11

Adjustedoperatingprofitfromcontinuingoperations 1,570 1,379 1,758 1,737

Profitbeforetaxcontinuingoperations 435 617 487 777

Adjustments:




Acquisition

related

costs

48 45 54

57

Reclassificationoftaxinjointventures 8 9 9 11

Disposalsandothernonoperatingitems 61 92 68 116

Adjustedprofitbeforetaxfromcontinuingoperations 1,279 1,205 1,432 1,518

Profitattributabletoparentcompaniesshareholders 391 476 438 587

Netprofitfromdiscontinuedoperations (18) (10)

Profitattributabletoparentcompaniesshareholders

continuingoperations 391

458 438 577

Adjustments(posttax):




Acquisition

related

costs

33 31 37

39

Disposalsandothernonoperatingitems (22) 61 (25) 77

Deferredtaxcreditsonacquiredintangibleassetsnotexpectedto

crystalliseinthenearterm (100)

(69)

(112) (86)

Adjustedprofitattributabletoparentcompanies

shareholdersfromcontinuingoperations 982

919 1,099 1,159

Cashgeneratedfromoperations 1,604 1,452 1,796 1,830

Dividendsreceivedfromjointventures 23 23 26 29

Purchasesofproperty,plantandequipment (78) (57) (87) (72)

Proceedsfromdisposalsofproperty,plantandequipment 4 5 4 6

Expenditureoninternallydevelopedintangibleassets (164) (115) (184) (145)

Paymentsrelatingtoexceptionalrestructuringcosts 124 72 139 91

Paymentsrelating

to

acquisition

related

costs

45 27 51

34

Adjustedoperatingcashflowfromcontinuingoperations 1,558 1,407 1,745 1,773


31/45



5

Adjustedfigures

continued

Totaloperations

2009

m2008

m

2009m

2008m

Profitattributabletoparentcompaniesshareholders

totaloperations 391 476

438 587

Adjustments(posttax):




Acquisition

related

costs

33 31 37

39

Disposalsandothernonoperatingitems (22) 43 (25) 67

Deferredtaxcreditsonacquiredintangibleassetsnotexpectedto

crystalliseinthenearterm (100)

(69)

(112) (86)

Adjustedprofitattributabletoparentcompanies

shareholdersfromtotaloperations 982

919 1,099 1,159

6 Pensionschemes

Theamountrecognisedinthebalancesheetinrespectofdefinedbenefitpensionschemesatthestartandendoftheyearandthe

movementsduringtheyearwereasfollows:

2009

m

2008

m

2009

m

2008

m

Atstartofyear (369) 50 (380) 68

Servicecost(includingcurtailmentcredits of43m/48m(2008:nil)) (24) (75) (27) (94)

Interestonpensionschemeliabilities (183) (180) (205) (227)

Expectedreturnonschemeassets 189 219 212 276

Actuarialgain/(loss) 6 (347) 7 (437)

Contributionsbyemployer 101 79 113 100

Acquisitions (9) (11)

Curtailmentondisposalofoperations 3 4

Exchangetranslationdifferences 45 (109) 17 (59)

Atendofyear (235) (369) (263) (380)

Thenetpensionobligationof235m/263mat31December2009comprisesschemesindeficitincludingunfundedschemeswithnet

pensionobligations

of

345m/386m

(2008:

521m/537m)

and

schemes

in

surplus

with

net

pension

assets

of

110m/123m

(2008:

152m/157m).


32/45



7

Provisions

Theamountrecognisedinthebalancesheetinrespectofprovisionsatthestartandendoftheyearandthemovementsduringtheyear

wereasfollows:

2009

m2008

m

2009m

2008m

Atstartofyear 114 21 117 28

Charged 227 79 254 100

Utilised (134) (9) (150) (11)

Exchangetranslationdifferences (12) 23 (2)

Atendofyear 195 114 219 117

Theamount

as

at

31

December

2009

comprises

property

provisions

of

89m/99m

(2008:

45m/46m),

relating

to

sub

lease

shortfalls

and

guaranteesgiveninrespectofcertainpropertyleases,andrestructuringprovisionsof106m/120m(2008:69m/71m),principally

relatingtoseveranceandoutsourcingmigrationcosts,andtherestructuringandclosureofRBIUScontrolledcirculationtitles.

8 Goodwillandintangibleassets

Carryingvaluesofgoodwillandintangibleassetshavebeenreviewedforindicationsofimpairment.Wheresuchindicationshavebeen

identified,thecarryingvalueoftheassethasbeencomparedwiththeestimatedvalueinuse. Asaresultofthisreviewimpairmentcharges

of142m/159mhavebeenrecordedinRBI,principallyrelatingtotheRBIUSdivision,and35m/39minReedExhibitionsrelatingtoa

numberofminorexhibitions. Thechargesreducegoodwillby110m/123mandacquiredintangibleassetsby67m/75m.

9 ProformaChoicePointfigures

On19September2008ReedElsevieracquiredChoicePoint,Inc.Proformarevenueandadjustedoperatingprofitforthebusinessexpressed

inUSdollarsaresetoutbelowpreparedonthebasisofReedElsevieraccountingpolicies,andasiftheacquisitionofChoicePointtookplace

on1January

2008,

and

they

exclude

the

results

of

businesses

sold,

transaction

related

expenses

and

other

non

recurring

operating

charges.

$ 2009

$m2008

$m

Revenue 917 912

Adjustedoperatingprofit 317 220

10 Exchangetranslationrates

Inpreparingthecombinedfinancialinformationthefollowingexchangerateshavebeenapplied:

Incomestatement Statementoffinancialposition

2009 2008 2009 2008

Euro

to

sterling

1.12 1.26 1.12

1.03USdollarstosterling 1.57 1.85 1.62 1.45

USdollarstoeuro 1.40 1.47 1.44 1.41


33/45


ReedElsevierPLCSummaryfinancialinformation

Basisofpreparation

TheReedElsevierPLCshareoftheReedElseviercombinedresultshasbeencalculatedonthebasisofthe52.9%economicinterestofthe

ReedElsevierPLCshareholdersintheReedElseviercombinedbusinesses,aftertakingaccountoftheresultsarisinginReedElsevierPLCand

itssubsidiaryundertakings.Thesummaryfinancialinformation,presentedincondensedform,hasbeenpreparedonthebasisofthegroup

accountingpoliciesofReedElsevierPLC.TheReedElsevierPLCgroupaccountingpoliciesareinaccordancewithInternationalFinancial

ReportingStandards(IFRS)asadoptedbytheEuropeanUnionandasissuedbytheInternationalAccountingStandardsBoard,andareset

outonpage149oftheReedElsevierAnnualReportsandFinancialStatements2008.IAS1PresentationofFinancialStatements(revised

2007)andamendmentstoIAS23BorrowingCosts,theeffectsofwhicharedescribedonpage25,becameeffectiveandwereadopted

accordinglyintheyear.ReedElsevierPLCs52.9%economicinterestinthenetassetsofthecombinedbusinessesisshowninthestatement

offinancialpositionasinvestmentsinjointventures,netoftheassetsandliabilitiesreportedaspartofReedElsevierPLCanditssubsidiary

undertakings.ThedirectorsofReedElsevierPLC,havingmadeappropriateenquiries,considerthatadequateresourcesexistforthegroupto

continuein

operational

existence

for

the

foreseeable

future

and

that,

therefore

Documents

Reed Elsevier 2009 Investor Presentation