Key performance measures

Reed Elsevier uses a range of performance indicators to help measure its development against strategy and financial objectives. These indicators include the following:

Key performance measure	Review of 2009 performance	Performance table
Underlying revenue growth Growth in revenue excluding acquisitions and disposals at constant currency(a)	Underlying revenue declined 6%, reflecting the impact of the global recession on our markets, particularly in advertising and promotion activities
Online revenue Online revenue(b) expressed as a percentage of total revenue	Good growth in online services and a full year contribution of the ChoicePoint business
In addition to the Reed Elsevier key performance measures reported above, the measures below illustrate performance within individual businesses
ScienceDirect usage Growth in full text article downloads	Full text article downloads increased close to 20%
Health Sciences online revenue Health Sciences online revenue expressed as a percentage of total Health Sciences revenue	Strong growth in online services
LexisNexis International online revenue LexisNexis International online revenue expressed as a percentage of total LexisNexis International revenue	Good growth in online services and their increasing adoption in international markets
Underlying adjusted operating profit growth Growth in adjusted operating profit(c) excluding acquisitions and disposals at constant currency	Underlying adjusted operating profit declined 9%, reflecting the operational gearing of lower underlying revenue, mitigated by cost actions
Adjusted operating margin Adjusted operating profit expressed as a percentage of revenue	Adjusted operating margin was unchanged. An underlying margin decline of 0.8 percentage points was offset by the strong growth in adjusted operating margin in the acquired ChoicePoint business
Adjusted EPS growth at constant rates Growth in adjusted earnings per share(d) expressed at constant currency	Adjusted EPS growth declined 9% at constant currency, reflecting the reduction in underlying adjusted operating profit and EPS dilution from the July 2009 equity placings
Return on invested capital Post tax(e) adjusted operating profit expressed as a percentage of average capital employed(f)	ROIC has decreased by 1.7 percentage points reflecting the initially dilutive impact of the ChoicePoint acquisition and lower adjusted profits excluding ChoicePoint
Cash flow conversion rate Adjusted operating cash flow(g) expressed as a percentage of adjusted operating profits	Cash flow conversion remained very high reflecting tight working capital management

Notes:

(a)

constant currency growth is calculated using the prior year average and hedge exchange rates.

(b)

online revenue represents revenue attributable to electronic products and services.

(c)

adjusted operating profit is defined as reported operating profit before amortisation and impairment of acquired intangible assets and goodwill, exceptional restructuring and acquisition related costs and share of taxation of joint ventures.

(d)

adjusted earnings per share is defined as reported earnings per share before the parent company’s share of amortisation and impairment of acquired intangible assets and goodwill, exceptional restructuring and acquisition related costs, disposals and other non operating items, related tax effects and movements on deferred tax balances not expected to crystallise in the near term.

(e)

the effective tax rate on adjusted operating profit reflects the tax rate excluding movements on deferred tax balances not expected to crystallise in the near term, more closely aligning with cash taxes payable, and includes the benefit of deductible tax amortisation on acquired goodwill and intangible assets.

(f)

invested capital is the average capital employed in the year expressed at the average exchange rates for the year. Capital employed represents the net assets of the business before borrowings and derivative financial instruments and current and deferred taxes, after adding back the cumulative amortisation and impairment of acquired intangible assets and goodwill and deducting from goodwill the gross up in respect of deferred tax liabilities recognised on acquisition of intangible assets.

(g)

adjusted operating cash flow is defined as the cash generated from operations plus dividends from joint ventures less net capital expenditure on property, plant and equipment and internally developed intangible assets, and excluding payments in relation to exceptional restructuring and acquisition related costs.

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