26th Feb 2015 14:54
(Items published at 1310 GMT and 0802 GMT incorrectly described the nature of the simplification in the lede. The correct version follows.)
LONDON (Alliance News) - Anglo-Dutch publisher Reed Elsevier PLC is the biggest faller in the FTSE 100 on Thursday after it announced plans to transfer the assets of its UK and Dutch parent companies into a single company in an effort to simplify its corporate structure and "increase transparency" for shareholders, and as it posted a rise in adjusted pretax profit for 2014.
The company is transferring ownership of all of its businesses and its two listed parent companies Reed Elsevier PLC and Reed Elsevier NV into a new single group entity, named RELX Group PLC, although it will not change its brand or name for customer-facing products and business units.
The company said the new name "reflects the transformation of the company to a technology, content and analytics driven business while maintaining the link with its proud heritage."
From July, it proposes to further simplify its structure by eliminating cross shareholding between the two parent companies, aligning their direct equity holdings in the new single group entity, with their external shareholders' respective economic interests of 52.9% for PLC and 47.1% for NV.
It plans to move the share equalisation ratio between Reed Elsevier PLC and Reed Elsevier NV to 1:1, and also intends to adjust the multiples on its American Depositary Shares so that they each represent one Reed Elsevier PLC or one Reed Elsevier NV share.
The new structure and share listings are subject to shareholder approvals.
Liberum views the simplification as positive, saying it will make the company easier to understand, and should narrow the historical discount of PLC to NV.
"This, therefore, should help the investment case," Liberum said.
Reed Elsevier proposed a full-year dividend of 26.0 pence for 2014, up from 24.60 pence a year before.
The publisher and events organiser posted adjusted earnings per share of 56.3 pence, up from 54.0 pence a year before, and in line with consensus analyst estimates of 56.28 pence. The company adjusts its figures to exclude amortisation, acquisition costs, disposal and other non operating items, and is the company's preferred performance measure.
The company posted a pretax profit of GBP1.59 billion, up 1% from GBP1.57 billion a year before, on a decline in revenue to GBP5.77 billion from GBP6.04 billion, as a result of an improved operating margin. Revenue growth in electronic, conferences and events helped to partially offset a continuing decline in print revenue.
Reed Elsevier completed GBP600 million of share buybacks in 2014, it said, and has a total of GBP500 million in share buybacks planned for 2015.
"Business trends in the early part of 2015 remain consistent with 2014 trends across our business, and we are confident that, by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit, and earnings growth in 2015," said Chief Executive Officer Erik Engstrom in a statement.
Liberum commented: "Reed's asset base is strong - its core Elsevier scientific publishing business is structurally resilient; its Exhibitions and Risk businesses provide growth; and, while conditions are likely to remain sluggish for legal publishing, this is c. 15% of group profits and is seeing some margin expansion."
Liberum reiterated its Buy rating on Reed Elsevier, with a target price of 1,300 pence.
Investec, however, has put its rating and forecasts for Reed Elsevier under review, noting that Reed shares have outperfomed and this implies its valuation is no longer cheap.
Investec said investors will have their own view on the change of name, but says its guess is that the simplification is good, but it needs more detail.
Shares in Reed Elsevier PLC were trading down 4.8% in London at 1,129.00 pence early Thursday afternoon. In Amsterday, Reed Elsevier NV shares were down 1.9% at EUR22.29.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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