The year has seen improved trading performance, with 2% organic revenue growth against a 6% decline last year. Increased spend on product development and sales & marketing was largely offset by cost efficiency gains.
During 2010, we also made good progress against the key priorities we outlined for each of the businesses at the start of the year. In Elsevier, subscription renewals for 2010 were completed in line with our expectations and the renewals process for 2011 is well progressed. We continued to develop new content and innovative tools, including the launch of SciVerse, an integrated platform for researchers. LexisNexis Risk Solutions captured the benefit of increased market activity and growing demand for data and analytics. LexisNexis Legal & Professional added new features and content sets, including the initial launch of Lexis Advance for Solos, the first of a series of tools for specific legal segments. Effective from January 2011, we reorganised LexisNexis Risk Solutions and Legal & Professional to operate as separate businesses, reporting directly to me, to sharpen the management focus on their respective markets. Reed Exhibitions significantly stepped up its launch programme with 35 new shows, particularly targeting high growth sectors and emerging markets and continued to invest in technology and innovation. Within Reed Business Information, we reshaped the portfolio, significantly reduced costs, and invested behind the successful data services business, including in early January this year the acquisition of a majority share in the leading petrochemical and energy information service CBI China.
Financial results
Total revenues were flat at £6,055m/up 4% to €7,084m and down 1% at constant currencies, as the portfolio was reshaped through disposal and closure, most notably in Reed Business Information. Importantly on an underlying basis, excluding acquisitions and divestments, revenues returned to growth, up 2%, reflecting both the progress against our business priorities made during the year and our more cyclical markets stabilising.
Adjusted operating profit was lower by 1% at £1,555m/up 3% at €1,819m and down 2% at constant currencies; on an underlying basis adjusted operating profit was down 1%. Increased spend on product development and sales & marketing, particularly in the legal & professional business, was funded largely by cost actions across the businesses with continuing focus on process innovation. Adjusted pre-tax profits were flat at £1,279m/up 4% at €1,496m, and 1% lower at constant currencies.
Adjusted operating cash flow continued to be strong at £1,519m/€1,777m with an excellent 98% conversion of adjusted operating profits into cash. The post tax return on capital employed improved to 10.6%, 0.2 percentage points higher reflecting the strong cash generation and increased capital efficiency.
Adjusted earnings per share were down 5% to 43.4p for Reed Elsevier PLC, 1% lower at €0.78 for Reed Elsevier NV, and 6% lower at constant currencies. This included a 4% dilutive effect from the July 2009 equity placing.
We use adjusted figures as key performance measures, and these are stated principally before amortisation on acquired intangible assets, exceptional restructuring charges and acquisition related costs, and disposal gains and losses. Including these items, reported operating profit and pre-tax profit were 39% and 77% higher in sterling and 45% and 84% higher in euros, reflecting no intangible asset and goodwill impairment and much lower exceptional charges as our major restructuring programmes completed, with charges in 2010 relating to Reed Business Information only. Reported earnings per share were 58% higher at 27.3p for Reed Elsevier PLC and 62% higher at €0.51 for Reed Elsevier NV.
The Elsevier science and medical business (46% of adjusted operating profit) saw modest growth reflecting a constrained customer budget environment. Elsevier has continued to develop innovative new content and tools, with the initial launch in 2010 of SciVerse, an integrated platform for accessing ScienceDirect, Scopus and scientific web content. Also launched in beta version is the SciVerse Application Marketplace which facilitates collaboration across the scientific community in the development of customised search and discovery applications. Further institutional planning and performance tools are also being developed to help academic and government institutions evaluate their research performance and determine research strategies. In Health Sciences, the focus of development is in clinical decision support point-of-care solutions, clinical practice guidelines and predictive analytics to address the demand to make healthcare more efficient and to improve medical outcomes.
LexisNexis (38% of adjusted operating profit) returned to overall revenue growth, with strong growth in the risk business. Subscription revenues in the legal business continued to reflect the lower levels of law firm activity and employment. Adjusted operating margin was lower due to the weaker revenues and increased spending in the legal business on new product development, related infrastructure and sales & marketing.
In the risk solutions business, strong growth in the insurance business is supported by high transactional activity in the US auto and property markets. A continuous pipeline of new data and analytics products also drives growth, ranging from helping insurers better assess underwriting risk to reducing cost and improving the effectiveness of the insurers’ workflow, from initial potential customer contact to policy renewal. Recently introduced products include
Data Pre-Fill, which provides accurate information directly into the insurance workflow on customers, potential customers and their auto ownership, and Insurance Exchange, which is directed at improving the efficiency and transparency of communications between insurance agents, brokers and carriers through the sharing of customer application data.
In the legal & professional business, continued good progress is being made in the development of the next generation of legal products and advanced operational infrastructure, which will be progressively introduced over the next few years. 2010 saw the initial market introduction, on version 1.0 of the new LexisNexis research platform, of Lexis Advance for Solos, a legal research tool specifically for US solo attorneys. This is the first of a series of tools for specific segments of the legal market. Features and content are also being progressively added to existing services such as Lexis for Microsoft Office, which enables lawyers to conduct their Lexis searches within Microsoft applications, and LexisNexis Verdict & Settlement Analyzer, which provides data and analytics on previous settlements. In the UK, LexisNexis continued to build out its practical guidance service LexisPSL, with the introduction of further practice areas, including company commercial. The increased spend on supporting these important developments has in part been mitigated by continuing cost efficiencies, including further outsourcing of production and engineering activities, supply chain management and operational streamlining.
Reed Exhibitions (10% of adjusted operating profit) saw good revenue growth with the net cycling in of biennial exhibitions and a significantly moderated decline in annual show revenues. The 2010 shows have seen overall success, with growing attendances at the majority of annual events and exhibitor numbers up 4% in the top 50 annual shows. While recovery in the larger markets has taken longer to materialise, by contrast, the shows in China, Russia, the Middle East and Brazil grew strongly. Reed Exhibitions significantly stepped up its launch programme in 2010 with 35 new events of which 14 were in Asia, including the successful Cloud Computing show in Japan, and the PAX East games event in Boston. Reed Exhibitions now operates nearly 100 shows in emerging markets with approximately 40 shows in each of Brazil and China. Reed Exhibitions also continued to develop websites, analytics and other innovative online tools to increase the effectiveness and efficiency of events for both exhibitors and attendees.
Reed Business Information (6% of adjusted operating profit) saw good growth in data services and online marketing solutions and significantly moderated declines in advertising markets. The portfolio was significantly reshaped and refocused. The sale and closure of the US controlled circulation magazines and certain other titles were completed, together with the sale of clusters of titles in Europe and Asia. The business was redefined by asset group and clear, distinct value creation plans were developed for each group. We invested in data services and in January 2011, we increased our investment to a majority position in the leading petrochemical and energy information service in CBI China. There was also a significant restructuring of the business with the consolidation of operations, procurement savings and tight cost control.
The business and financial reviews, set out in the Business review section, describe in more detail our markets, businesses and the performance and outlook by business.
Outlook
Going forward we will continue to focus on creating value for our customers, in each business unit and across Reed Elsevier. As we go into 2011, most of our markets are stable or improving and we are building on the actions taken in 2010 to strengthen the business further. Overall, we expect a gradual recovery and a continued improvement in performance.
We are focused on creating value for our professional customers through helping them to deliver better outcomes more efficiently. The business units have well defined priorities designed to capture growth and deliver good returns targeting high growth markets supported by a commitment to new product development and increased sales & marketing. Across Reed Elsevier, we enhance these initiatives through the building and leveraging of institutional skills, including professional customer analysis and product development, knowledge, methods and people as well as sharing resources in software, technology and infrastructure.
We have a strong management team in place, with a sharpened focus on value creation and operational execution. Our employees are knowledgeable and passionate about the customers they serve and are critical to achieving our goals over the coming years. I would like to thank them for their continuing enthusiasm and commitment to our customers and to creating value for Reed Elsevier.
Erik Engstrom
Chief Executive Officer
Reed Elsevier has seen a significant migration from print products to electronic content and tools over the last ten years, so that print revenues now account for only 25% of revenues.