Considerable progress has been made during the year resulting in improvements in trading performance with underlying sales returning to positive organic growth. Reported profits are strongly ahead with the bulk of our major restructuring programmes now behind us. Management has put in place business unit teams to sharpen the focus on value creation and operational execution. I am confident that the good progress which is being made on individual business priorities will deliver further improvements.
I am pleased to report that Reed Elsevier has made significant progress in 2010 as our markets strengthened and we saw the benefit of the actions which management has taken in the business. Underlying revenues were 2% higher in constant currencies with the return to growth reflecting improved performance in our more cyclical markets, together with a sustained commitment to new product development and a focus on sales & marketing initiatives. Our reported revenues were flat at £6,055m expressed in sterling and increased by 4% to €7,084m expressed in euros. During the year, action was taken to divest low return assets, such that total revenues were 1% lower in constant currencies.
Firm action on costs and further innovations in our operational processes has meant that total costs at constant exchange rates declined 1% and adjusted operating margins at 25.7% were just 0.2 percentage points lower than in 2009, despite the increased spending on new product development and sales & marketing. Adjusted operating profits were 1% lower at £1,555m/up 3% at €1,819m. Adjusted profit before tax was flat at £1,279m/up 4% at €1,496m. Adjusted earnings per share were down 5% for Reed Elsevier PLC at 43.4p and 1% lower for Reed Elsevier NV at €0.78, taking into account 4% dilution from the July 2009 equity placing.
Reported operating profit was up 39% to £1,090m/45% to €1,275m. This reflects the absence of intangible asset and goodwill impairment in 2010 and much lower exceptional restructuring charges as we get these programmes behind us. Reported earnings per share for Reed Elsevier PLC were up 58% at 27.3p and for Reed Elsevier NV up 62% at €0.51.
Dividends
The Boards are recommending equalised final dividends of 15.0p for Reed Elsevier PLC and €0.303 for Reed Elsevier NV, flat and up 3% respectively against the prior year. This brings the total for the year to 20.4p for Reed Elsevier PLC and €0.412 for Reed Elsevier NV, respectively unchanged and an increase of 3%. The differing growth rates reflect movements in the sterling-euro exchange rate between dividend announcement dates.
Balance Sheet
During the year our net debt, which is principally denominated in US dollars, reduced from $6.3 billion to $5.4 billion reflecting the excellent cash generation in the year and capital discipline. Our financial position is strong and our balance sheet is well placed to support our business strategies.
Management and Boards
Over the past twelve months, our Chief Executive Officer, Erik Engstrom, has been reshaping the management organisation. LexisNexis, with effect from January 2011, has been divided into the Risk Solutions and Legal & Professional businesses, with distinct management teams reporting directly to him. Reed Business Information has undergone a major restructuring of its portfolio and operations during the year and is now organised by key asset groups, each with its own specific strategic priorities and management team. These changes will further improve the focus of each business in their respective markets and accelerate our progress.
In December 2010, Andrew Prozes retired from our Boards and as Chief Executive Officer of LexisNexis after 10 years of service. During that time, Andy built a leading Risk Solutions business, led the transition of the legal businesses from publishers of content to providers of online solutions, and developed a leadership position in online legal solutions outside the US. I would like to thank Andy for his contribution to the development of LexisNexis and Reed Elsevier over many years.
In April 2010, Dien de Boer-Kruyt retired from the Reed Elsevier NV Supervisory Board. At the Annual General Meetings in April 2011, Lord Sharman will also be stepping down as a non-executive director of our Boards. Both completed more than nine years of valuable Board service. Colin Sharman also served for all this period as an important member of the Audit Committees, eight years as their chairman, and was a key member of the Nominations Committee. I would like to thank both Dien and Colin for their substantial contributions to the Boards through a period of significant change for Reed Elsevier.
Marike van Lier Lels joined the Reed Elsevier NV Supervisory Board in January 2010 in anticipation of Dien’s retirement and I am pleased to say that Mr Adrian Hennah will join our Boards as a non-executive director, to succeed Lord Sharman, subject to shareholder approval at the respective Annual General Meetings in April. Adrian is a serving Chief Financial Officer of a FTSE 100 company with over 25 years’ experience in finance and operations in the medical devices, technology and pharmaceuticals industries and he will bring highly relevant experience to our board discussions. On appointment, he will become a member of our Audit Committees and of the Corporate Governance Committee.
Going forward
Our markets have stabilised or are showing improvement. Each of our businesses is focused on value creation and operational execution. I am confident that the good progress which is being made on individual business priorities will deliver further improvements.
Anthony Habgood
Chairman
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