FOLDFOLDFOLDFOLDAnnual Reports andFinancial Statements 2013Annual Reports and Financial Statements 2013www.reedelsevier.com81018_SAS_Cover.indd 1807/03/2014 18:59 FOLD
FOLD
Reed Elsevier is a world leading provider of
information solutions for professional customers
across industries. We help scientists make new
discoveries, lawyers win cases, doctors save lives,
corporations build commercial relationships,
insurance companies assess risk, and government
and financial institutions detect fraud.
Credits
Designed and produced by
saslondon.com
Board photography by
Iain Crockart
Printed by
Pureprint Group, ISO14001, FSC® certified and CarbonNeutral®
The 2013 Annual Reports and Financial Statements is printed
using paper containing a minimum of 75% recycled content,
of which 100% is de-inked post-consumer waste. All of the pulp
is bleached using an elemental chlorine free process (ECF).
Printed in the UK by Pureprint using their
environmental printing technology; vegetable inks were used
throughout. Pureprint is a CarbonNeutral® company. Both
manufacturing mill and printer are ISO14001 registered and are
Forest Stewardship Council® (FSC) chain-of-custody certified.
and
Get more information online
A full pdf of the Annual Report and further
information about Reed Elsevier and our
businesses can be found online at our
corporate website: www.reedelsevier.com
Forward-looking statements
The Reed Elsevier Annual Reports and Financial Statements 2013 contain forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as
amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. These statements are subject to a number of risks and uncertainties that could cause actual
results or outcomes to differ materially from those currently being anticipated. The terms “estimate”, “project”, “plan”, “intend”, “expect”, “should be”, “will be”, “believe” and
similar expressions identify forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but
are not limited to competitive factors in the industries in which Reed Elsevier operates; demand for Reed Elsevier’s products and services; exchange rate fluctuations; general
economic and business conditions; legislative, fiscal, tax and regulatory developments and political risks; the availability of third-party content and data; breaches of our data
security systems and interruptions in our information technology systems; changes in law and legal interpretations affecting Reed Elsevier’s intellectual property rights and
other risks referenced from time to time in the filings of Reed Elsevier with the US Securities and Exchange Commission.
81018_SAS_Cover.indd 19
FOLD
FOLD
07/03/2014 18:59
Reed Elsevier Annual Reports and Financial Statements 2013
1
Contents
Overview*
2
3
4
2013 Financial highlights
Chairman’s statement
Chief Executive Officer’s report
Business review*
8
14
20
30
36
41
Reed Elsevier
Scientific, Technical & Medical
Risk Solutions & Business Information
Legal
Exhibitions
Corporate Responsibility
Financial review*
52
60
Chief Financial Officer’s report
Principal risks
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Governance
64
66
68
69
77
78
95
Board Directors
Reed Elsevier Business Leaders
Chairman's introduction to corporate governance
Structure and corporate governance
Report of the Nominations Committee
Directors' Remuneration Report
Report of the Audit Committees
G
o
v
e
r
n
a
n
c
e
Financial statements and
other information
Combined financial statements
Summary combined financial information in euros
Reed Elsevier PLC Annual Report and Financial Statements
Reed Elsevier NV Annual Report and Financial Statements
Summary financial information in US dollars
Shareholder information
97
141
155
177
202
206
209 Contacts
210
211
2014 financial calendar
Principal operating locations
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
* Comprises the Strategic Report in accordance with The (UK) Companies
Act 2006 (Strategic Report and Directors Report) Regulations 2013.
m
a
t
i
o
n
29275_SAS_p001-006.indd 1
07/03/2014 10:27
2
OVERVIEW
REED ELSEVIER
2013 Financial highlights
Underlying revenue up 2% (3% excluding biennial exhibition cycling)
Underlying adjusted operating profit up 5%
Adjusted EPS up 9% to 54.0p for Reed Elsevier PLC; up 5% to €0.99 for Reed Elsevier NV
Reported EPS up 9% to 48.8p for Reed Elsevier PLC; up 5% to €0.91 for Reed Elsevier NV
Full year dividend up 7% to 24.60p for Reed Elsevier PLC and up 8% to €0.506 for
Reed Elsevier NV
Return on invested capital up 0.4pts to 12.1%
Net debt stable at £3.1bn; 2.1x EBITDA pensions and lease adjusted (1.6x unadjusted)
Reed Elsevier combined businesses
REVENUE
ADJUSTED OPERATING PROFIT
£m
€m
£m
€m
Underlying Growth +2%/+3%*
7,523
7,121
6,116
6,035
Underlying Growth +5%
2,076
2,064
1,688
1,749
2012
2013
2012
2013
2012
2013
2012
2013
* Excluding biennial exhibition cycling.
Parent companies
REED ELSEVIER PLC
Adjusted EPS
pence
Growth +9%
49.4
54.0
Dividend
pence
Growth +7%
23.0
24.6
REED ELSEVIER NV
Adjusted EPS
€
Growth +5%
0.94
0.99
Dividend
€
Growth +8%
0.467
0.506
2012
2013
2012
2013
2012
2013
2012
2013
Adjusted and underlying figures are additional performance measures used by management. Adjusted figures are reconciled to the reported figures in note 10 to the combined financial
statements and note 9 to the respective parent company financial statements. 2012 comparative financial information has been restated following the adoption of IAS19 Employee
Benefits (revised), see the accounting policies section in the combined financial statements on page 106. Underlying growth rates are calculated at constant currencies, and exclude the
results of all acquisitions and disposals made in both the year and prior year and assets held for sale. Constant currency growth rates are based on 2012 full year average and hedge
exchange rates. The underlying growth in revenue and in adjusted operating profit are the key performance indicators used by Reed Elsevier in assessing performance.
29275_SAS_p001-006.indd 2
07/03/2014 10:27
Reed Elsevier Annual Reports and Financial Statements 2013
3
Chairman’s statement
Dividends
The Boards are recommending equalised final dividends of 17.95p
for Reed Elsevier PLC and €0.374 for Reed Elsevier NV, up
respectively 6% and 11% against the prior year. This brings the total
dividends for the year to 24.60p for Reed Elsevier PLC, up 7% and
€0.506 for Reed Elsevier NV, up 8%. The differing growth rates of
the interim and final dividends for the two parent companies reflect
movements in the sterling-euro exchange rate between dividend
announcement dates.
Balance sheet
Net debt was £3.1bn/€3.7bn on 31 December 2013, compared with
£3.1bn/€3.8bn last year. Net debt/EBITDA on a pensions and lease
adjusted basis for 2013 was 2.1x, down from 2.2x last year, and on
an unadjusted basis, it was 1.6x, down from 1.7x last year. Adjusted
operating cash flow conversion was 97%, up from 95% in 2012, with
capital expenditure at 5% of revenues.
Share buybacks
Strong cash flow, together with proceeds from the disposal of
businesses, enabled us to step up our share buyback programme
while maintaining a strong balance sheet. In 2013 we deployed
a total of £600m on share buybacks, and by the end of February
2014 we had deployed an additional £100m. In 2014, although we
expect disposal proceeds to be lower, we intend to deploy a total of
£600m on share buybacks, based on our strong balance sheet and
cash flow.
The Boards
In September, Duncan Palmer, Chief Financial Officer, offered his
resignation from the Boards of Reed Elsevier. This was a result of
family circumstances which unexpectedly required him to return to
the US. Duncan has made an important contribution to the
business and we wish him the best for the future. In January 2014,
we announced Nick Luff would take over from Duncan. Nick has
been Chief Financial Officer at Centrica plc, the UK energy group,
since 2007, and prior to that was at P&O, the FTSE 100 logistics and
shipping group. Nick’s many years of experience as Chief Financial
Officer at a FTSE 30 company and involvement in dual UK/US and
Netherlands-based listings, make him an excellent fit for Reed
Elsevier. He will join the company in 2014.
Following the introduction of new legislation in the Netherlands
and the approval of changes to the articles of association of Reed
Elsevier NV by its shareholders, the Directors adopted a unitary
board structure in May 2013. This further aligns the structure of the
two parent companies.
During the year, we also continued the process of progressively
refreshing the non-executive element of the Boards. At the Annual
General Meetings in April, a number of changes were made. Sir
David Reid and Mark Elliott retired as Non-Executive Directors
after 10 years’ service. Lisa Hook, who joined the Boards in April
2006, became the Senior Independent Director. As previously
announced, Wolfhart Hauser joined the Boards in April. I would like
to thank David and Mark for their many years of advice and wisdom,
and welcome Wolfhart to Reed Elsevier.
Corporate responsibility
Our focus on corporate responsibility remains a source of strength
for Reed Elsevier. I fully support all our efforts to ensure the
highest levels of ethical management. We are making consistent
progress against our corporate responsibility objectives, and with
our commitment to increase the diversity of our Boards.
Anthony Habgood
Chairman
Anthony Habgood
Chairman
Reed Elsevier continued to deliver
on its long-term strategic and
financial priorities in 2013.
Continued underlying revenue
and profit growth was achieved
across all five major business
units, with improved profitability
driven by process innovation and
portfolio development. Our strong
cash flow enabled us to step up
our share buyback programme
while maintaining balance
sheet strength.
Growth of underlying revenues, which exclude the effects of currency
translation, acquisitions and disposals, was 2%, or 3% excluding
the cycling effect of biennial exhibitions, with all five business
areas contributing to underlying growth. Our reported revenues
declined by 1% to £6,035m expressed in sterling and 5% to €7,121m
expressed in euros, or down 3% at constant exchange rates,
reflecting disposals made across the businesses.
Underlying adjusted operating profits grew 5%, with the
improvement in profitability reflecting a combination of process
innovation and portfolio development across all business areas.
Adjusted operating profits grew 4% to £1,749m expressed in
sterling, down 1% to €2,064m expressed in euros.
Adjusted earnings per share grew 9% to 54.0p for Reed Elsevier
PLC, and 5% to €0.99 for Reed Elsevier NV. Reported earnings per
share grew 9% to 48.8p for Reed Elsevier PLC, and 5% to €0.91 for
Reed Elsevier NV.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p001-006.indd 3
07/03/2014 10:27
4
OVERVIEW
CHIEF EXECUTIVE OFFICER’S REPORT
Chief Executive Officer’s report
Strategic direction
Our strategy remains consistent: to become a global professional
information solutions provider, a company that delivers improved
outcomes for professional customers across industries. Our goal
is to help our customers make better decisions, get better results
and be more productive. We do this by leveraging a deep
understanding of our customers to create innovative solutions
which combine content and data with analytics and technology in
global platforms. These solutions often account for about 1% of
our customers’ total cost base but can have a significant and
positive impact on the economics of the remaining 99%.
We continue to build leading positions in long-term global growth
markets by leveraging our skills, assets and resources across
Reed Elsevier, both to build solutions for our customers and to
pursue cost efficiencies.
During the year we continued to make progress in this strategic
direction. We are systematically migrating all of our businesses
across Reed Elsevier, primarily through organic investment.
We are supplementing this organic transformation with selective
acquisitions of targeted data and content sets, and assets in high-
growth markets and geographies, where we are the natural owner
and can accelerate our strategy with good returns. We continue to
divest assets that we are unable to migrate or where we do not see
significant future value creation for Reed Elsevier.
By focusing on evolving the fundamentals of our business we
believe that, over time, we are improving the business profile of
Reed Elsevier and the quality of our earnings. This is leading to
more predictable revenues through a better asset mix and
geographic balance; a higher growth profile by expanding in
higher growth segments, exiting from structurally challenged
businesses and gradually reducing the drag from print format
declines; and improved returns by focusing on organic
development with strong cash generation.
Erik Engstrom
Chief Executive Officer
In 2013 we continued to make
good progress on our strategy to
systematically transform our
business into a professional
information solutions provider
that combines content and data
with analytics and technology to
deliver improved outcomes for
customers. We are enhancing the
quality of our earnings to deliver
more predictable revenues, a
higher growth profile and
improving returns.
UNDERLYING REVENUE GROWTH
Excluding biennial exhibition cycling
UNDERLYING ADJUSTED OPERATING PROFIT GROWTH
+3%
+3%
+3%
+1%
2010
2011
2012
2013
+5%
+6%
+5%
–1%
2010
2011
2012
2013
29275_SAS_p001-006.indd 4
07/03/2014 10:27
Reed Elsevier Annual Reports and Financial Statements 2013
5
2013 progress
In 2013 we remained focused on improving the business profile of
our assets and the quality of our earnings. We did this primarily
through organic investment.
We maintained our positive operating and financial momentum
throughout the year. All five major business areas again delivered
underlying revenue and profit growth. We improved profitability
through process innovation and portfolio development.
By the end of 2013, 81% of our revenues were in our targeted
formats of electronic and face-to-face, generating average
underlying revenue growth rates of 5% to 7%.
During the year, we continued the reshaping of our portfolio,
making a small number of data, content and exhibition
acquisitions in high-growth markets and geographies. We also
continued our disposal activity, exiting businesses that are not
likely to transform into the type of business that we want to be in,
or where we do not see significant future value creation for Reed
Elsevier. We also exited businesses where we have made a
decision not to invest further to pursue a global leadership
position. For example, we completed the disposal of our
employment screening business from within Risk Solutions and
exited additional print magazines within Business Information.
With a strong balance sheet, strong cash flow characteristics and
with average acquisition spend comfortably covered by free
cash flow after dividends we continued to take a pragmatic
approach to ensuring that the value compounding within the
business translates into shareholder value. As part of this we
increased our share buyback programme to £600m in 2013.
Financial performance
Underlying revenue growth was 2%, or 3% excluding the effects of
biennial exhibition cycling. Underlying operating profit grew 5%,
and adjusted earnings per share grew 7% at constant exchange
rates. Despite continued organic investment in our business and
the completion of a number of small acquisitions, our return on
invested capital increased to 12.1%. At the end of 2013 our net
debt/EBITDA ratio was 2.1 times on a pensions and lease adjusted
basis, or 1.6 times on an unadjusted basis, both slightly lower than
the prior year, and we remain in a leverage range with which we
are very comfortable.
Scientific, Technical & Medical achieved good volume growth in
primary research submissions and usage, and in databases &
tools, across scientific, technical & medical markets. Journal
quality, as measured by Impact Factor, continued to improve.
Electronic revenues, which now account for 72% of total revenues,
grew strongly across all segments.
All business segments in Risk Solutions achieved strong growth
in 2013. Growth in the insurance segment was driven by good take
up of new products and services, expansion into adjacent market
verticals, and volume growth in the core underwriting business.
Business Services growth reflected strong demand for identity
verification and fraud detection solutions. Growth in government
revenues reflected new product sales.
In Business Information underlying revenue growth accelerated
in 2013 reflecting continued good growth in data services and
modest growth elsewhere.
In Legal underlying revenue growth was maintained in 2013
despite subdued market conditions in the US and Europe.
Electronic revenues continued to show good growth, largely offset
by print declines. The roll out of new product releases continued,
with over 70% of US legal customers activated on the New Lexis
platform at period end, and new product usage progressing well.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Exhibitions maintained strong underlying revenue growth of 7%
excluding the effect of biennial show cycling. While growth in
Europe was modest, the US, Japan, Brazil and other markets all
grew strongly.
G
o
v
e
r
n
a
n
c
e
EARNINGS PER SHARE GROWTH
Constant currency
RETURN ON INVESTED CAPITAL
+8%
+7%
+6%
10.6%
11.2%
11.7%*
12.1%
2010
2011
2012
2013
-6%
2010
2011
2012
2013
* 2012 ROIC restated for IAS19.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p001-006.indd 5
07/03/2014 10:27
6
OVERVIEW
CHIEF EXECUTIVE OFFICER’S REPORT
Corporate responsibility
We prioritise corporate responsibility in order to maximise the
beneficial impact we have on society. In 2013, for example,
LexisNexis Legal & Professional drafted Global Rule of Law
Business Principles, outlining the responsibilities companies
have to promote justice. These were launched at an event with UN
Secretary-General Ban Ki-moon. We also made progress in the year
on our corporate responsibility objectives, including responding
to global Employee Opinion Survey results across our business
segments and launching a new product accessibility policy.
Outlook
Early trends across our business in 2014 remain broadly
consistent with full year 2013, with some small variations by
market and by geography. We are confident that, by continuing to
execute on our strategy, we will deliver another year of underlying
revenue, profit and earnings growth in 2014.
In 2014 we again intend to deploy a total of £600m on share
buybacks, reflecting our strong balance sheet and cash flow.
Erik Engstrom
Chief Executive Officer
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
REVENUE BY TYPE
£6,035m
19%
15%
£6,035m
21%
Electronic
Face to face
Print/Other
51%
North America
Europe
Rest of World
£6,035m
4%
Subscriptions
Transactional
Advertising
66%
28%
44%
52%
29275_SAS_p001-006.indd 6
07/03/2014 10:27
Reed Elsevier Annual Reports and Financial Statements 2013
7
Business
review
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
In this section
Reed Elsevier
8
14 Scientific, Technical & Medical
20 Risk Solutions & Business Information
30 Legal
36 Exhibitions
41 Corporate responsibility
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p007-040.indd 7
07/03/2014 10:46
8
BUSINESS REVIEW
REED ELSEVIER
Reed Elsevier
Reed Elsevier is a world leading provider of information solutions
for professional customers across industries. We help scientists
make new discoveries, lawyers win cases, doctors save lives,
corporations build commercial relationships, insurance
companies assess risk, and government and financial institutions
detect fraud.
We achieve this by using our deep customer understanding to
combine high-quality content & data with analytics & technology in
global platforms. These solutions often account for about 1% of our
customers’ total cost base but can have a significant, positive impact
on the economics of the remaining 99%. We seek to build leading
positions in long-term growth markets by leveraging our institutional
skills, assets and resources across Reed Elsevier, both to build
solutions for our customers and to pursue cost efficiencies.
Across Reed Elsevier, we are systematically migrating in this
direction, primarily through organic development, by investing in
the transformation of our assets and building out new products
and solutions in adjacent markets and geographies. We are
supplementing organic growth with selective acquisitions that
can accelerate our strategy with good returns. We continue
to divest assets that we are unable to align in this direction,
or where we do not see significant future value creation.
29275_SAS_p007-040.indd 8
07/03/2014 10:46
Reed Elsevier Annual Reports and Financial Statements 2013
9
Reed Elsevier combined businesses
REPORTED FIGURES
For the year ended 31 December
Revenue
Operating profit
Profit before tax
Net profit
Net margin
Net borrowings
ADJUSTED FIGURES
For the year ended 31 December
Operating profit
Operating margin
Profit before tax
Net profit
Net margin
Operating cash flow
Operating cash flow conversion
Return on invested capital
Parent companies
Adjusted earnings per share
Reported earnings per share
Ordinary dividend per share
2013
£m
6,035
1,376
1,196
1,110
18.4%
3,072
2013
£m
1,749
29.0%
1,572
1,197
19.8%
1,703
97%
12.1%
£
2012**
£m
6,116
1,333
1,151
1,044
17.1%
3,127
£
2012**
£m
1,688
27.6%
1,472
1,121
18.3%
1,603
95%
11.7%
Change
–1%
+3%
+4%
+6%
Change
+4%
+7%
+7%
+6%
2013
€m
7,121
1,624
1,412
1,310
18.4%
3,686
2013
€m
2,064
29.0%
1,855
1,413
19.8%
2,010
97%
12.1%
€
2012**
€m
7,523
1,639
1,416
1,284
17.1%
3,846
€
2012**
€m
2,076
27.6%
1,811
1,379
18.3%
1,972
95%
11.7%
Change at
constant
currencies
Change
underlying
–3% +2%/+3%*
+1%
+2%
+3%
Change
–5%
–1%
0%
+2%
Change
underlying
+5%
Change at
constant
currencies
+1%
+4%
+4%
+4%
Change
–1%
+2%
+2%
+2%
Reed Elsevier PLC
Reed Elsevier NV
2013
54.0p
48.8p
24.6p
2012
Change
2013
2012
Change
49.4p
44.8p
23.0p
+9%
+9%
+7%
€0.99
€0.91
€0.506
€0.94
€0.87
€0.467
+5%
+5%
+8%
Change at
constant
currencies
+7%
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
* Excluding biennial exhibition cycling.
** 2012 comparative financial information has been restated following the introduction of IAS19 Employee Benefits (revised).
The Reed Elsevier combined businesses encompass the businesses of Reed Elsevier Group plc and Elsevier Reed Finance BV, together with their two parent companies,
Reed Elsevier PLC and Reed Elsevier NV (the “Reed Elsevier combined businesses”). The results of Reed Elsevier PLC reflect its shareholders’ 52.9% economic interest in the
Reed Elsevier combined businesses. The results of Reed Elsevier NV reflect its shareholders’ 50% economic interest in the Reed Elsevier combined businesses. The respective
economic interests of the Reed Elsevier PLC and Reed Elsevier NV shareholders take account of Reed Elsevier PLC’s 5.8% indirect interest in Reed Elsevier NV.
Reed Elsevier serves customers in more than 180 countries
and has 28,200 full-time employees worldwide.
G
o
v
e
r
n
a
n
c
e
51%
of revenues
GENERATED IN
NORTH AMERICA
90%
of revenues
GENERATED OUTSIDE
UK & NETHERLANDS
81%
of revenues
GENERATED FROM
ELECTRONIC OR FACE
TO FACE FORMATS
$500m
investment
ON TECHNOLOGY
EVERY YEAR
4th
largest provider
IN THE WORLD FOR DIGITAL
PAID CONTENT
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p007-040.indd 9
07/03/2014 10:46
10
BUSINESS REVIEW
REED ELSEVIER
LEVERAGING INNOVATION
ACROSS REED ELSEVIER:
HPCC SYSTEMS
High Performance Computing Cluster Systems
(HPCC), is one of the most advanced, fast-performing
Big Data processing technologies available today. It
is open source and used to solve large-scale,
complex data and analytics challenges. Within Reed
Elsevier, HPCC Systems is being leveraged across
our largest market segments. HPCC Systems
combines proven data processing methodologies
with Reed Elsevier’s proprietary linking algorithms,
to enable our customers to turn data into intelligence
– better, faster and cheaper.
HPCC Systems was developed by LexisNexis Risk
Solutions and currently powers core products from
this division, which had 2013 revenues of £933m.
Similarly Lexis Advance, our legal segment’s new
flagship product, is also enriched and managed by
HPCC Systems, providing unrivalled capabilities and
solutions for our customers. The latest version of
SciVal, our scientific, technical & medical segment’s
tool for universities and other institutions to assess
their relative performance, runs on HPCC Systems
technology. SciVal provides analysis of over 30m
pieces of content and 350m citations from 4,600
institutions in 220 countries. The business is deploying
HPCC Systems on ScienceDirect, its primary research
database, aimed at recommending related articles.
The scheme increased click-throughs by 65%.
29275_SAS_p007-040.indd 10
07/03/2014 10:46
Reed Elsevier Annual Reports and Financial Statements 2013
11
LEVERAGING INNOVATION
ACROSS REED ELSEVIER:
HPCC SYSTEMS
WITH HPCC SYSTEMS, WE ARE
UNLOCKING THE INTELLIGENCE IN
OUR CONTENT AND LINKING NEW
SOURCES OF DATA TO CREATE THE
NEXT LEVEL OF ANALYTICS AND
SOLUTIONS THAT WILL IMPROVE
OUTCOMES FOR OUR CUSTOMERS.
Jeffrey Honious
Vice President
Innovation,
Reed Elsevier
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
37bn
records
LEXISNEXIS RISK
SOLUTIONS' PUBLIC
RECORDS DATABASE
CONTAINS 37BN RECORDS
30m
transactions
per hour
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
HPCC SYSTEMS IS AN
OPEN-SOURCE, BIG DATA
PROCESSING PLATFORM
THAT CAN HANDLE 30M
TRANSACTIONS PER HOUR
G
o
v
e
r
n
a
n
c
e
2
petabytes of
unique data
RISK SOLUTIONS’ PUBLIC
RECORDS DATABASE
HOLDS 2 PETABYTES OF
UNIQUE DATA WITH A
CAPACITY TO HOLD
4 PETABYTES
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 11
07/03/2014 10:47
m
a
t
i
o
n
12
BUSINESS REVIEW
REED ELSEVIER
Reed Elsevier operates across a number of market segments
MARKET SEGMENTS
SEGMENT POSITION
KEY BRANDS
In Scientific, Technical & Medical markets, we provide information and
tools to help customers improve scientific and healthcare outcomes.
Global #1
In Risk Solutions & Business Information, we provide data, analytics and
insight that enable customers to evaluate and manage risks, and develop
market intelligence, supporting more confident decisions, improved
economic outcomes, and enhanced operational efficiency.
Key verticals #1
Risk Solutions
In Legal markets, we are a world leading provider of legal, regulatory and
news & business information and analysis to legal, corporate,
government and academic customers.
US #2
Outside US #1 or 2
Legal & Professional
In Exhibitions, we are the world’s leading events business, with almost
500 events in over 30 countries.
Global #1
Financial summary by market segment
Revenue
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Adjusted operating profit
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Unallocated items
2013
£m
2,126
933
547
1,567
862
6,035
826
414
107
238
213
(49)
1,749
2012
£m
2,063
926
663
1,610
854
6,116
780
392
119
234
210
(47)
1,688
Change
Change at constant
currencies
+3%
+1%
–17%
–3%
+1%
–1%
+6%
+6%
–10%
+2%
+1%
+4%
+1%
–1%
–19%
–4%
+2%
–3%
+2%
+4%
–11%
+1%
+4%
+1%
Change
underlying
+2%
+8%
+4%
+1%
+2%/+7%*
+2%/+3%*
+3%
+8%
+14%
+5%
+4%
+5%
* Excluding biennial exhibition cycling.
Adjusted and underlying figures are additional performance measures used by management. Adjusted figures are reconciled to the reported figures in note 10 to the combined financial
statements and note 9 to the respective parent company financial statements. 2012 comparative financial information has been restated following the adoption of IAS19 Employee
Benefits (revised), see the accounting policies section in the combined financial statements on page 106. Underlying growth rates are calculated at constant currencies, and exclude the
results of all acquisitions and disposals made in both the year and prior year and assets held for sale. Constant currency growth rates are based on 2012 full year average and hedge
exchange rates. The underlying growth in revenue and in adjusted operating profit are the key performance indicators used by Reed Elsevier in assessing performance.
REVENUE
£6,035m
14%
35%
26%
ADJUSTED OPERATING PROFIT
£1,749m
12%
13%
6%
Scientific,
Technical
& Medical
Risk Solutions
Business
Information
Legal
Exhibitions
Scientific,
Technical
& Medical
46%
Risk Solutions
Business
Information
Legal
Exhibitions
9%
16%
23%
29275_SAS_p007-040.indd 12
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
13
Market
segments
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 13
07/03/2014 10:47
m
a
t
i
o
n
14
BUSINESS REVIEW
SCIENTIFIC, TECHNICAL & MEDICAL
Scientific, Technical & Medical
In Scientific, Technical &
Medical markets, we provide
information and tools to help
customers improve scientific
and healthcare outcomes.
Elsevier is the world’s leading provider of scientific, technical &
medical information serving scientists, health professionals, and
students worldwide. Its objective is to help its customers advance
science and improve healthcare by providing world-class content
and innovative information solutions that enable them to make
critical decisions, enhance productivity, and improve outcomes.
Revenues for the year ended 31 December 2013 were £2,126m.
Elsevier is a global business with principal operations in
Amsterdam, Beijing, Boston, Chennai, Delhi, London, Madrid,
Munich, New York, Oxford, Paris, Philadelphia, Rio de Janeiro,
St. Louis, San Diego, Singapore and Tokyo. It has 6,700 employees.
Approximately 38% of revenue by destination in 2013 was derived
from North America, 30% from Europe and the remaining 32%
from the rest of the world.
Elsevier serves the needs of the science, technology & medical
markets by publishing primary research, reference, and
education content, as well as by providing a range of database and
workflow solutions. Elsevier’s customers are scientists,
academic institutions “educators”, research leaders and
administrators, medical researchers, doctors, nurses, allied
health professionals and students, as well as hospitals, research
institutions, health insurers, managed healthcare organisations,
research-intensive corporations, and governments. All of these
customers rely on Elsevier to provide high-quality content and
critical information for making scientific and medical decisions;
to review, publish, disseminate and preserve research findings;
to create innovative tools to help focus research strategies,
increase research effectiveness, improve medical outcomes, and
enhance the efficiency of healthcare and healthcare education.
In the primary research market during 2013, over 1m research
papers were submitted to Elsevier. Over 10,000 editors managed
the peer review and selection of these papers, resulting in the
publication of more than 350,000 articles in over 2,000 journals,
many of which are the foremost publications in their field and a
primary point of reference for new research. This content was
accessed by around 11m people, with more than 700m full text
article downloads last year. Content is provided free or at very low
cost in most of the world’s poorest countries. Elsevier’s journals
are primarily published and delivered through the ScienceDirect
platform, the world’s largest database of scientific and medical
research, hosting over 12m pieces of content, and 26,000 full text
e-books. Flagship journals include Cell and The Lancet families
of titles.
In 2013 Elsevier acquired Mendeley, an innovative research
management and social collaboration platform. Researchers
use Mendeley’s desktop and cloud-based tools to manage
and annotate documents, create citations and bibliographies,
collaborate on research projects and network with
fellow academics.
Elsevier is also a global leader in the scientific, technical &
medical reference market, providing authoritative and current
professional reference content. While reference has traditionally
been a print industry, Elsevier has been a leader in driving the
shift from print to electronic. Flagship titles include works such
as Gray’s Anatomy, Nelson’s Pediatrics and Netter’s Atlas of
Human Anatomy.
Provides research performance tools
for academic institutions and funding
intelligence
Premier life sciences journal with the
highest impact factor in biochemistry
and molecular biology
Combines leading reference and
evidence-based medical content into its
fully integrated clinical insight engine
An innovative research management and
social collaboration platform
Leading web-based chemical reaction
workflow solution for industrial chemists
One of the world’s leading medical journals
since 1823
The world’s largest database of scientific
and medical research articles
A leading comprehensive care planning and
clinical documentation system
29275_SAS_p007-040.indd 14
07/03/2014 18:14
Reed Elsevier Annual Reports and Financial Statements 2013
15
Elsevier launched ClinicalKey in 2012, providing physicians with
access to leading Elsevier and third-party reference and
evidence-based medical content in a single, fully integrated site.
Since launch ClinicalKey has grown rapidly, and currently serves
over 1,000 institutions.
In medical education, Elsevier serves students of medicine,
nursing and allied health professions through print and electronic
books, as well as electronic solutions. For example, Evolve, an
online suite of solutions designed to help students of nursing and
allied health professions, had over 4m registered users in 2013.
Elsevier’s database and workflow products provide a range
of tools and solutions for professionals in the science,
technical and medical fields. Customers include academic
and corporate researchers, research administrators and
healthcare professionals.
For academic and corporate researchers, significant products
include Scopus, Reaxys, and Knovel. Scopus is the largest abstract
and citation database of research literature in the world, with over
50m abstract and bibliographic information records from more
than 20,000 peer-reviewed journals and 5,000 international
publishers. Reaxys is a leading solution for synthetic chemists,
integrating chemical reaction and compound data searching with
synthesis planning.
Knovel provides a range of web-based productivity tools for
the engineering community, integrating technical information
with analytics and search to deliver trusted answers and
drive innovation.
Elsevier serves academic and government research
administrators through its SciVal suite of products that help them
evaluate their institutions’ research performance, determine
research strategies and increase institutional efficiencies.
Leveraging bibliometric data, such as citations from Scopus, SciVal
Spotlight helps institutions and governments to identify their
distinctive research strengths, evaluate performance and
increase the focus of their research and development
investments. SciVal Funding assists researchers and institutions in
identifying grants that are most relevant in their research areas.
For healthcare professionals, Elsevier develops products to deliver
patient-specific solutions at the point of care to improve patient
outcomes. Its clinical solutions include Gold Standard, which
provides critical information on drug interactions to assist effective
treatment and CPM Resource Center, which provides a data-driven
framework to support nurses in undertaking procedures.
Market opportunities
Scientific, technical & medical information markets have good
long-term growth characteristics. The importance of research and
development to economic performance and competitive positioning
is well understood by governments, academic institutions and
corporations. This is reflected in the long-term growth in research
and development spend and in the number of researchers
worldwide. Growth in health markets is driven by ageing populations
in developed markets, rising prosperity in developing markets
and the increasing focus on improving medical outcomes and
efficiency. Given that a significant proportion of scientific research
and healthcare is funded directly or indirectly by governments,
spending is influenced by governmental budgetary considerations.
The commitment to research and health provision does, however,
remain high, even in more difficult budgetary environments.
Strategic priorities
Elsevier’s strategic goal is to lead the way in providing information
solutions that advance science, technology and health. To achieve
this, Elsevier creates solutions that reflect deep insight into the
way its users work and the outcomes they are seeking to achieve;
strives for excellence in content, service and execution; constantly
adapts and revitalises its products, business models and
technology; and leverages its institutional skills, assets and
resources to promote innovation and efficiency.
Elsevier’s strategic priorities are to continue to increase content
volume and quality; to expand content coverage, building out
integrated solutions combining Elsevier, third-party and customer
data; to increase content utility, using “Smart Content” to enable
new e-solutions; to combine content with analytics and
technology, focused on measurably improving productivity and
outcomes for customers; and to continue to drive operational
efficiency and effectiveness.
In the primary research market, Elsevier aims to grow volume
through new journal launches, expansion of author-pays journals
and growth from emerging markets; to enhance quality by building
on our premium brands; and to add value to core platforms by
implementing new capabilities such as advanced
recommendations on ScienceDirect and social collaboration
through Mendeley.
In clinical reference markets, priorities are to expand content
coverage, including licensing high-quality third-party content for
ClinicalKey, as well as ensuring consistent tagging to link content
assets across products.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
£2,126m
£2,126m
Print
27%
Face-to-face
1%
Electronic
72%
Rest of World
32%
North America
38%
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
Europe 30%
m
a
t
i
o
n
29275_SAS_p007-040.indd 15
07/03/2014 10:47
16
BUSINESS REVIEW
SCIENTIFIC, TECHNICAL & MEDICAL
Business model, distribution channels and competition
Science and medical research is principally disseminated on a
paid subscription basis to the research facilities of academic
institutions, government and corporations, and, in the case of
medical and healthcare journals, also to individual practitioners
and medical society members. For a number of journals,
advertising and promotional income represents a small
proportion of revenues predominantly from pharmaceutical
companies in healthcare titles.
Over the past 15 years alternative payment models for the
dissemination of research such as “author-pays open access” or
“author’s-funder-pays” have emerged. While it is expected that
paid subscription will remain the primary distribution model,
Elsevier has long invested in alternate business models to
address the needs of customers and researchers. Over 1,600 of
Elsevier’s journals now offer the option of funding research
publishing and distribution via a sponsored article fee. In addition,
Elsevier now publishes more than 50 open access journals.
Electronic products, such as ScienceDirect, Scopus and ClinicalKey,
are generally sold direct to customers through a dedicated sales
force that has offices around the world. Subscription agents
facilitate the sales and administrative process for print journals.
Books are sold through traditional and online book stores,
wholesalers and, particularly in medical and healthcare markets,
directly to end users.
Competition within science and medical publishing is generally on
a title-by-title and product-by-product basis. Competing journals,
books and databases are typically published by learned societies
and other professional publishers. Workflow tools face similar
competition as well as from software companies and internal
solutions developed by customers.
RELATIVE IMPACT FACTOR
GROWTH IN ARTICLE SUBMISSIONS
1.02
1.06
1.08
1.11
+9%
2010
2011
2012
2013
2012
2013
Improvement in quality of Elsevier journal content relative to other
publishers. Relative impact factors based on journal-level impact factors
released by Thomson Reuters in the given year. (Industry average = 1.)
Continued increase in number of article submissions submitted to
Elsevier journals.
29275_SAS_p007-040.indd 16
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
17
Revenue
Adjusted operating profit
2013
£m
2,126
826
2012
£m
2,063
780
Change
+3%
+6%
Change at constant
currencies
+1%
+2%
Change
underlying
+2%
+3%
Portfolio development continued in 2013. Disposals included
Elsevier Business Intelligence and a number of small print and
pharma focused assets. We supported our organic growth
strategy with small targeted acquisitions, including Mendeley,
an online reference management and collaboration solution.
2014 Outlook
The customer environment remains broadly unchanged on
last year, with variations by geography and customer segment.
We expect continued volume growth and strong demand for
electronic products and solutions, and continued declines in print
book and pharma promotion revenues. Overall we expect another
year of modest underlying revenue growth in 2014.
2013 financial performance
Strong volume growth in primary research submissions and
usage, and in databases & tools, across the scientific, technical
and medical segments. Electronic revenues, which now account
for 72% of the total, grew strongly across all segments. Print
book sales and pharma promotion continued to decline.
Underlying revenues grew 2% and underlying adjusted operating
profits grew 3%.
In primary research, growth in article submissions and usage
remained strong across the scientific, technical and medical
segments, and journal quality, as measured by Impact Factor,
continued to improve. Revenue growth was driven by solid
subscription renewals and new sales. “Author-pays” or
“author’s-funder-pays” article volumes continued to grow
strongly from a small base. Good growth in scientific databases
& tools and electronic clinical solutions was also supported by
strong new sales.
Print book sales and pharma promotion continued to decline
reflecting a combination of format migration and structural
changes in the pharmaceutical industry.
REVENUE
£m
2,026
2,058
2,063
2,126
ADJUSTED OPERATING PROFIT
£m
724
768
780
826
2010
2011
2012
2013
2010
2011
2012
2013
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 17
07/03/2014 10:47
m
a
t
i
o
n
18
BUSINESS REVIEW
SCIENTIFIC, TECHNICAL & MEDICAL
700m
each year
MORE THAN 11M SCIENTISTS
DOWNLOAD MORE THAN
700M ARTICLES FROM
SCIENCEDIRECT, THE
WORLD’S LEADING PRIMARY
SCIENTIFIC, TECHNOLOGY &
MEDICAL DATABASE
29275_SAS_p007-040.indd 18
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
19
SCIENCEDIRECT:
PREMIER PLATFORM
FOR DISCOVERING
WORLD OF RESEARCH
As one of the largest research-intensive
universities in the UK, the University of Leeds is
home to 7,600 staff and 30,000 students from
over 130 countries. The university engages in
world-class research across an exceptionally
diverse range of disciplines and is ranked in the
UK’s top 10 for research power1. The university
has particular strengths in interdisciplinary
research in areas such as energy, water and
climate change, human health and wellbeing.
The University of Leeds Library includes three
campus facilities, which together house around
3m volumes as well as countless individual
manuscript and archival items. The Library
provides access to over 35,000 electronic journal
titles as well as an increasing number of
electronic databases and monographs.
In August 2000, the University of Leeds first
subscribed to Elsevier’s ScienceDirect database.
Initially the university took print copies of journals
alongside the electronic information, but
switched to electronic only in 2002.
1 2008 Research Assessment Exercise
About ScienceDirect
ScienceDirect is one of the world’s
largest databases of peer-reviewed
full-text scientific, technical and
medical content. Over 11m researchers,
healthcare professionals, teachers,
students and information professionals
around the globe rely on ScienceDirect
as a trusted source of over 2,000
journals and 26,000 book titles.
ScienceDirect supports research and
education with interactive elements in
articles such as audio, video, graphs,
tables and images, and offers tools so
users can easily set alerts. With over
12m content pieces available,
ScienceDirect is a premier platform for
discovering the world of research.
INFORMATION IN THE FORM OF
PEER-REVIEWED ARTICLES
FORMS A ‘HIGH-OCTANE FUEL’ FOR
RESEARCH. SCIENCEDIRECT’S
VAST ARRAY OF QUALITY
JOURNALS, MANY OF WHICH ARE
CENTRAL TO THEIR DISCIPLINES,
FORMS AN ESSENTIAL PART OF
THE RESEARCH INFRASTRUCTURE
HERE AT LEEDS. IT IS HIGHLY
VALUED BY OUR ACADEMIC
COMMUNITY.
Dr Stella Butler
University Librarian
and Keeper of the
Brotherton Collection
29275_SAS_p007-040.indd 19
07/03/2014 10:47
20
BUSINESS REVIEW
RISK SOLUTIONS & BUSINESS INFORMATION
Risk Solutions & Business Information
In Risk Solutions & Business
Information, we provide data,
analytics and insight that enable
customers to evaluate and
manage risk, and develop market
intelligence, supporting more
confident decisions, improved
economic outcomes, and
enhanced operational efficiency.
Risk Solutions
LexisNexis Risk Solutions is a leading provider of solutions that
combine proprietary, public and third-party information, with
advanced technology and analytics, and are powered by High
Performance Computing Cluster (HPCC) Systems. These solutions
assist customers in evaluating, predicting and managing risk and
improving operational effectiveness, predominantly in the US.
Revenues for the year ended 31 December 2013 were £933m.
LexisNexis Risk Solutions, headquartered in Alpharetta, Georgia,
has principal operations in Georgia, Florida, and Ohio, and has
3,300 employees.
LexisNexis Risk Solutions is organised around market-facing
industry/sector groups: insurance, business services (including
the financial services, receivables management and corporate
groups), government, and healthcare. The largest of these is
insurance. These groups are supported by a shared infrastructure
for technology operations, data management, and other support
functions including compliance and marketing. A number of
transactional support activities, including some financial
processes, are provided from a shared services organisation
managed by the LexisNexis Legal & Professional business.
The Legal & Professional business also distributes Risk Solutions
products into legal markets in the US and internationally.
Insurance Solutions provides a comprehensive combination of
data and analytics to property and casualty, personal and
commercial lines insurance carriers and life insurance carriers in
the US to improve critical aspects of their business, from customer
acquisition and underwriting to claims handling. Information
solutions, including the most comprehensive US personal loss
history database, C.L.U.E.®, help insurers assess risks and provide
important inputs to pricing and underwriting insurance policies.
Additional key products include LexisNexis® Data Prefill, which
provides critical information on customers, potential customers
and their auto, property and life policy information directly into the
insurance workflow, and LexisNexis® Current Carrier, which identifies
current or previous insurance as well as any lapses in coverage.
Business Services provides financial institutions with risk
management, identity management, fraud detection, credit risk
management, and compliance solutions. These include “know
your customer” and anti-money laundering (AML) products. The
business also provides risk and identity management solutions for
corporate customers in retail, telecommunications and utilities
sectors. Receivables management solutions help debt recovery
professionals in the segmentation, management and collection of
consumer and business debt.
Government Solutions provides data and analytics to US federal,
state and local law enforcement and government agencies to help
solve criminal and intelligence cases and to identify fraud, waste
and abuse in government programmes.
Health Care Solutions provides identity, fraud, and clinical
analytics solutions across key stages of the healthcare workflow
to enable intelligent decision making for payers and providers.
The Risk Solutions business also provides risk-related information
to the legal industry through LexisNexis Legal & Professional.
Risk Solutions
LexisNexis® Data Prefill
Tool to automate insurance application
process providing critical information
insurers need to quote and underwrite a policy
C.L.U.E.®
Most comprehensive US personal insurance
claims database
Accurint® for Collections
The leading online US solution to help locate
debtors quickly and accurately
LexisNexis® Current Carrier
Database that identifies the existence of
current or previous insurance, and whether
or not the applicant has had a possible lapse
in coverage
LexisNexis®
Identity Management
Range of solutions to help clients verify that
an identity exists and authenticate individuals
LexisNexis® Anti-Money
Laundering Solutions
Content and information for anti-money
laundering compliance, risk mitigation
and enhanced due diligence
LexisNexis® RiskView
Comprehensive suite of credit risk
management tools to help assess consumer
creditworthiness and risk potential
LexisNexis® Revenue
Recovery and Discovery
Suite of tools to enable governments to
leverage public records and analytics to
identify instances of fraud and to more
efficiently collect on outstanding debts
29275_SAS_p007-040.indd 20
07/03/2014 18:14
Reed Elsevier Annual Reports and Financial Statements 2013
21
Market opportunities
Risk Solutions operates in markets with strong long-term
underlying growth drivers including: insurance underwriting
transactions; insurance, healthcare, tax and entitlement fraud;
credit defaults and financial fraud; regulatory compliance and due
diligence requirements surrounding customer enrolment; and
security and privacy considerations.
In the insurance segment, growth is supported by increasing
transactional activity in the auto, property and life insurance
markets and the increasing adoption by insurance carriers of more
sophisticated data and analytics in the prospecting, underwriting
and claims evaluation processes, to assess underwriting risk,
increase competitiveness and improve operating cost efficiency.
Transactional activity is driven by growth in insurance quoting
and policy switching, as consumers seek better policy terms.
This activity is stimulated by increasing competition between
insurance companies, high levels of carrier advertising, and
rising levels of internet quoting and policy binding.
A number of factors support growth for risk solutions in the
financial services market, including new credit originations,
continued high fraud losses, stringent regulatory compliance
requirements, and increasing anti-money laundering fines. In
receivables management, demand is driven mainly by levels of
consumer debt and the prospect of recovering that debt, which is
impacted by employment conditions in the US. In corporate
markets, demand is supported by growth in online retail sales and
continued high levels of credit card fraud. Growth in government
markets is driven by the increasing use of data and analytics to
combat criminal activity, fraud and tax evasion, and to address
security issues. The level and timing of demand in this market is
influenced by government funding and revenue considerations. In
Health Care, there are numerous growth drivers for fraud and
analytics solutions including the expansion of insurance coverage
under the Affordable Care Act and the focus on cost containment
and better patient outcomes.
Risk Solutions continues to focus on developing a pipeline of new
solutions to drive growth in existing business segments and
selected adjacent markets and geographies. In 2013, this strategy
was reinforced with a number of focused acquisitions.
In the Insurance business, Risk Solutions acquired Mapflow, an
industry-leading geographic risk assessment technology
company based in Dublin, Ireland. Mapflow’s technology
combined with Risk Solutions’ comprehensive data, advanced
analytics, supercomputing platform (HPCC Systems) and linking
capabilities help commercial and home insurers better
understand property-level geographic peril risk to make more
informed underwriting decisions.
In Business Services, Risk Solutions acquired the remaining stake
in WorldCompliance, a leading provider of customer and vendor
screening content, to complement existing AML and compliance
solutions. Risk Solutions also acquired RSA Security’s consumer
Knowledge Based Authentication technology to drive further
innovation and strengthen its leadership position in identity
management. In Health Care, the acquisition of Enclarity
supplements the existing identity and fraud, waste, and abuse
solutions with the most comprehensive provider information
available. The transition of MEDai from Elsevier to Risk Solutions’
Health Care business was announced, enabling the combination of
MEDai’s clinical expertise with Risk Solutions’ analytics, data, and
HPCC technology to create leading clinical analytics solutions.
The identity management and risk evaluation solutions provided
by Risk Solutions utilise comprehensive database platforms of
public records and proprietary information with more than
2 petabytes of unique data, which makes it the largest database of
its kind in the US market today. LexisNexis Accurint is a flagship
product, powered by the HPCC technology. This market-leading
technology enables Risk Solutions to provide its customers with
highly relevant search results swiftly and to create new, low-cost
solutions quickly and efficiently. It is also increasingly used across
other Reed Elsevier markets such as Legal and Scientific,
Technical & Medical.
In February 2013, Risk Solutions completed the sale of its
Screening business. This allows it to increase its focus on
higher-growth segments leveraging its core data, technology and
analytical capabilities. The Screening business presented limited
opportunities to apply these capabilities to generate unique
customer value, sustained growth, and superior margins.
REVENUE BY FORMAT
REVENUE BY SEGMENT
£933m
Print 4%
£933m
Government
Other
Electronic
96%
Insurance
Solutions
Business
Services
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p007-040.indd 21
07/03/2014 10:47
22
BUSINESS REVIEW
RISK SOLUTIONS & BUSINESS INFORMATION
Strategic priorities
Risk Solutions’ strategic goal is to make businesses and
government more effective, through a better understanding of the
risks associated with individuals, other businesses and
transactions and by providing the highest quality tools to help
manage those risks efficiently and cost effectively. To achieve this,
Risk Solutions is focused on: delivering innovative new products
across customer workflows; expanding the range of risk
management solutions across adjacent markets; addressing
international opportunities in selected markets to meet local risk
management needs; and continuing to strengthen its content,
technology, and analytical capabilities.
Business model, distribution channels and competition
Risk Solutions’ products are predominantly sold directly, with
pricing mostly on a transactional basis for insurance carriers
and corporations, and primarily on a subscription basis for
government entities.
Risk Solutions and Verisk, a competitor, each sell data and
analytics solutions to insurance carriers but largely address
different activities. Risk Solutions’ principal competitors in
commercial and government segments include Thomson Reuters
and major credit bureaus, which in many cases address different
activities in these segments as well.
GROWTH IN DATA PREFILL SOLUTIONS
GROWTH IN ANTI-MONEY LAUNDERING SCREENINGS
+16%
24%
2012
2013
2012
2013
Growth in automated solutions that deliver information for quoting and
underwriting at the point of initial contact with the consumer.
Growth in anti-money laundering screenings driven by strong regulatory
enforcement.
29275_SAS_p007-040.indd 22
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
23
Revenue
Adjusted operating profit
2013
£m
933
414
2012
£m
926
392
Change
+1%
+6%
Change at constant
currencies
–1%
+4%
Change
underlying
+8%
+8%
2013 financial performance
All business segments achieved strong growth in 2013. The
improvement in adjusted operating margin largely reflects the
impact of portfolio changes, as underlying cost growth was in
line with underlying revenue growth, reflecting continued new
product development.
Underlying revenues grew 8% and underlying adjusted operating
profits grew 8%.
Revenue growth in the insurance segment was driven by good take
up of new products and services across the insurance workflow,
expansion into adjacent market verticals, and volume growth in
the core underwriting business. The expansion into international
markets is progressing well, although the absolute revenue
contribution remains small relative to Risk Solutions overall.
Business Services growth reflected strong demand for identity
authentication and fraud detection solutions across markets. The
US mortgage refinancing market did slow down in the second half
as expected, but the impact of this was largely offset by continued
good growth elsewhere.
New product sales drove strong growth in government revenues
for the year, somewhat tempered by a slowdown in federal
markets in the fourth quarter.
The 2013 results reflect the impact of portfolio changes, including
the disposal of the pre-employment screening business in the first
half, and some small acquisitions, including Mapflow and
Enclarity. Taken together, portfolio changes had the effect of
reducing reported revenues but increasing the adjusted operating
profit margin, with underlying cost growth broadly matching
revenue growth.
2014 Outlook
The outlook for the federal government segment and mortgage
refinancing market is uncertain, but the fundamental growth
drivers of the Risk Solutions business remain strong. We will
continue to invest in new products that leverage our leading
content and analytics expertise, and to extend our services in new
verticals and geographies. Overall we expect good underlying
revenue growth across market segments.
REVENUE
£m
927
908
926
933
ADJUSTED OPERATING PROFIT
£m
354*
362
392
414
473
2010
2011
2012
2013
2010
2011
2012
2013
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
*Comparative profit figures for 2010 are presented on a pro forma basis.
m
a
t
i
o
n
29275_SAS_p007-040.indd 23
07/03/2014 10:47
24
BUSINESS REVIEW
RISK SOLUTIONS & BUSINESS INFORMATION
$60m
FLORIDA’S DEPARTMENT
OF CHILDREN AND
FAMILIES EXPECTS
TO SAVE TAXPAYERS
$60M A YEAR
THANKS TO
LEXISNEXIS RISK
SOLUTIONS.
LEXISNEXIS RISK SOLUTIONS:
PARTNERING TO PROTECT
FLORIDA’S BENEFITS
RECIPIENTS
29275_SAS_p007-040.indd 24
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
25
Identify theft and fraud has grown into a real threat to
governments and individuals alike. In Florida, which
ranks first in the US for identity theft, LexisNexis is
working alongside the Department of Children and
Families (DCF) to tackle the problem.
In May 2013, the state of Florida launched the
Customer Authentication Program in partnership with
DCF. LexisNexis technology is integrated into Florida’s
ACCESS* program which helps confirm that benefit
applicants are who they say they are. With about 90%
of Florida’s benefits recipients applying for assistance
online, the program plays a critical role in detecting
and investigating fraud. In its earliest stages alone,
the program detected three times the levels of
fraud expected.
Following the success of the pilot, the partnership
between LexisNexis and DCF is being rolled out
across the state and is expected to save taxpayers
millions of dollars.
* Automated Community Communication Economic Self Sufficiency
BY VERIFYING THE IDENTITY OF THE CUSTOMER
BEFORE PROCESSING THEIR APPLICATION, WE KNOW
WHETHER THE PERSON SEEKING BENEFITS IS TRULY
THE INDIVIDUAL APPLYING FOR THEM. WE EXPECT
THIS NEW APPROACH TO FIGHTING FRAUD WILL
SAVE TAXPAYER DOLLARS, EXPEDITE APPLICATION
PROCESSING AND MAKE CERTAIN THAT ONLY
THOSE WHO NEED BENEFITS RECEIVE THEM.
Suzanne Vitale
Former Deputy Secretary
for the Florida DCF
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 25
07/03/2014 10:47
m
a
t
i
o
n
26
BUSINESS REVIEW
RISK SOLUTIONS & BUSINESS INFORMATION
Business Information
Reed Business Information (RBI) provides information and online
data services to business professionals worldwide. RBI provides
its customers with high-value industry critical data services,
information and tools as well as producing conferences, websites
and business magazines. It has many strong global brands with
market-leading positions across a wide range of industry sectors.
Revenues for the year ended 31 December 2013 were £547m.
RBI is a global business with principal operations in London,
Amsterdam, Chicago, Atlanta and Shanghai. RBI has 3,900
employees worldwide. Approximately 28% of revenue in 2013
came from North America, 20% from the United Kingdom, 39%
from Continental Europe and 13% from the rest of the world.
RBI’s customers use its data and online services to help make key
strategic decisions, to improve productivity and performance,
to identify new business opportunities and to reduce risk. RBI’s
magazines and websites deliver high-value news, information
and opinion to business professionals across many industry
sectors while also providing an effective marketing channel
for customers.
RBI’s market-leading data services include: ICIS, an information
and data service in chemicals, fertilisers and energy; Accuity,
a provider of services and solutions to the banking and corporate
sectors focused on payment efficiency, Know Your Customer
(KYC), anti-money laundering (AML) and compliance. XpertHR,
an online service providing regulatory guidance, best practices
and tools for HR professionals; and Reed Construction Data, a
provider of online construction data and information to the
construction industry.
RBI’s other leading brands include Flightglobal, New Scientist,
Farmers Weekly, Estates Gazette, Elsevier and Boerderij.
In 2013, RBI continued to reshape its portfolio, exiting areas not
core to its paid content strategy. As part of this strategy RBI has
continued to exit its Marketing Solutions businesses. Approved
Index was sold in 2013, BuyerZone has been sold since year end
and the sale process of emedia is ongoing. In addition RBI
completed its exit of its publishing businesses in Australia,
France, Spain and Italy. ICIS made a small acquisition in the carbon
trading information space, Tschach Solutions.
Data, news and advisory services for
professionals working in the global
aviation industry
Payment routing data, AML services
and compliance tools for the banking
and corporate sectors worldwide
Global provider of news, price benchmarks,
data, analytics and research to the energy,
chemical and fertiliser industries
Online services with reference data,
compliance information and good practice
guides for HR professionals
News, data and research services for the
UK commercial property industry
Provider of actionable insight for the
construction industry through cost data,
project leads, market intelligence, and
marketing solutions
Leading news and opinion magazine
in the Netherlands
News, insight and software solutions for
farmers and agricultural businesses
29275_SAS_p007-040.indd 26
07/03/2014 18:14
Reed Elsevier Annual Reports and Financial Statements 2013
27
Market opportunities
The growing need for high-quality industry data and information
and insight is driving demand for online subscription data services
and providing new opportunities.
Data services are typically sold directly on a subscription or
transactional basis. Business magazines are mainly distributed
on a paid basis. Advertising revenues are sold directly or
through agents.
RBI’s products compete with a number of information providers
on a service and title-by-title basis including: IHS, McGraw Hill
and Wolters Kluwer as well as many niche and privately owned
competitors. RBI competes for online advertising with other
business-to-business websites, search engines and social media.
Strategic priorities
RBI’s strategic goal is to help business professionals achieve
better outcomes with information and decision support in its
individual markets. Its areas of strategic focus are: further
growing the data services businesses; restructuring the
advertising-driven portfolio and focusing other products on
paid content; and driving further organisational effectiveness.
Business model, distribution channels and competition
Across the RBI portfolio, user and subscription revenues
now account for 78% of the total business with the remaining
22% derived from print and online advertising and lead
generation. RBI electronic revenue streams now account
for 60% of total revenue.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
REVENUE BY FORMAT
USER AND SUBSCRIPTION REVENUE
Print
33%
Face-to-face
7%
Electronic
60%
59%
62%
69%
78%
G
o
v
e
r
n
a
n
c
e
2010
2011
2012
2013
REVENUE BY SEGMENT
REVENUE BY GEOGRAPHICAL MARKET
£547m
Other Business
Magazines & Services
£547m
Rest of World
13%
North America
28%
Major Data
Services
Leading Brands
Marketing
Solutions
Rest of
Europe
39%
UK
20%
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p007-040.indd 27
07/03/2014 10:47
28
BUSINESS REVIEW
RISK SOLUTIONS & BUSINESS INFORMATION
Revenue
Adjusted operating profit
2013
£m
547
107
2012
£m
663
119
Change
–17%
–10%
Change at constant
currencies
–19%
–11%
Change
underlying
+4%
+14%
2013 financial performance
Underlying revenue growth accelerated in 2013 reflecting
continued good growth in data services and modest growth
elsewhere. Focus on process innovation drove a further
improvement in adjusted operating profit margin.
Underlying revenues grew 4%, and underlying adjusted operating
profits grew 14%.
Major Data Services, which now accounts for over 50% of
continuing portfolio revenue, achieved strong growth in 2013
driven by Accuity, ICIS and XpertHR.
Leading Brands and Other Business Magazines & Services
achieved modest growth, despite weak print advertising
markets, with solid results from data solutions and the
agricultural segments.
The improvement in adjusted operating profit margin in the year
was entirely the result of the continued organic transformation
of the business.
In 2013 we continued to exit from businesses that no longer fit our
strategy, with disposals during the period including RBI Australia,
Italy, and France. Since the beginning of 2014 we have also divested
BuyerZone in the Marketing Services segment.
Since bringing the management structure of Business Information
and Risk Solutions more closely together at the end of 2012 we have
made good initial progress on leveraging Risk Solutions’ strength in
data, analytics and technology across Business Information’s
broader geographic footprint.
2014 Outlook
We expect continued good underlying growth in Major Data
Services and stable Leading Brands and Other Business
Magazines & Services.
REVENUE
£m
ADJUSTED OPERATING PROFIT
£m
718
695
663
110
119
107
547
89
2010
2011
2012
2013
2010
2011
2012
2013
29275_SAS_p007-040.indd 28
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
29
ICIS:
DELIVERING
TRUSTED DATA
TO DECISION
MAKERS
LANXESS, the leading speciality chemicals
company, needs up-to-date, trusted data and
high-value news and analysis on which to make
critical commercial decisions.
To achieve this it relies on ICIS, the world’s largest
petrochemical market information provider. Over 30
years, ICIS has built an unrivalled global network,
respected methodologies and a team of distinguished
industry experts in petrochemicals, energy and
fertilisers to give companies in global commodities
markets a competitive advantage.
LANXESS DEALS IN OVER 1,300 CHEMICALS AND IT’S
ESSENTIAL THAT WE ACCESS THE SAME TRANSPARENT,
GLOBAL DATA AS OUR SUPPLIERS AND CUSTOMERS. THAT
DATA COMES FROM ICIS.
AS WELL AS DATA, ICIS’ DAILY NEWS SERVICE IS THE FIRST
THING I LOOK AT EACH MORNING. IT COVERS NEWS ABOUT
THE MARKETS, OUR SUPPLIERS AND OUR COMPETITION.
ICIS IS AS CLOSE TO A ONE-STOP-SHOP AS WE HAVE FOUND.
Holger Hüppeler
Head of Global Procurement and
Logistics, LANXESS AG
29275_SAS_p007-040.indd 29
07/03/2014 10:47
30
BUSINESS REVIEW
LEGAL
Legal
In Legal markets, we are a world
leading provider of legal,
regulatory and news & business
information and analysis to law
firm, corporate, government and
academic customers.
Serving customers in more than 175 countries, LexisNexis Legal
& Professional provides resources and services that inform
decisions, increase productivity and drive new business.
Revenues for the year ended 31 December 2013 were £1,567m.
LexisNexis Legal & Professional is headquartered in New York
and has principal operations in the New York area, Ohio and North
Carolina in the US, Toronto in Canada, London and Paris in Europe,
and cities in several other countries in Africa and Asia Pacific. It
has 10,000 employees worldwide. Approximately 68% of revenue
by destination in 2013 was derived from North America, 21% from
Europe and the remaining 11% from the rest of the world.
LexisNexis Legal & Professional is organised in market-
facing groups. These are supported by global shared
services organisations providing platform and product
development, operational and distribution services, and
other support functions.
In the US, in Research & Litigation Solutions, electronic
information solutions and innovative workflow tools, developed
through close collaboration with customers, help legal and
business professionals make better informed decisions in
the practice of law and in managing their businesses. Flagship
products for legal research are Lexis.com and Lexis Advance, which
provide federal and state statutes and case law, together with
analysis and expert commentaries from sources such as Matthew
Bender and Michie and the leading citation service Shepard’s,
which advises on the continuing relevance of case law precedents.
Research solutions also include news and business information,
ranging from daily news to company filings, as well as public
records information and analytics. Through its litigation solutions,
LexisNexis provides lawyers with a suite of tools covering case
preparation to processing and review to trial preparation.
LexisNexis partners with law schools to provide services to
students as part of their training.
In 2013, LexisNexis continued to release new versions of Lexis
Advance, an innovative web application designed to transform how
legal professionals conduct research. Built on an advanced
technology platform, Lexis Advance allows primary researchers
within legal and professional organisations to find highly relevant
information more easily and efficiently, helping them to drive better
outcomes. Future releases will continue to expand content and
outreach and add new innovative tools. LexisNexis employs
lawyers and trained editors with professional legal backgrounds
who review, annotate and update the legal content to help ensure
each document in the collection is current and comprehensive.
This domain expertise combined with the application of Reed
Elsevier’s “big data” HPCC technology means LexisNexis is able to
update its entire legal collection faster and more efficiently, while
also identifying and linking content, enabling customers to uncover
previously undiscovered relationships between documents.
Legal & Professional
Lexis®
Unparalleled legal, news and public records
content for legal professionals
Lexis® Library
LexisNexis® UK flagship legal online product
Matthew Bender®
Critical analysis, checklists, forms, and
practice guides authored by industry experts
covering over 50 major practice areas
Premier citations service
Lexis® PSL
LexisNexis® UK legal practical
guidance service
New online legal research tool that
transforms the way legal professionals
conduct research
Lexis® Practice Advisor
New resource that offers guidance to help
attorneys handle transactional matters more
efficiently and effectively
JurisClasseur
Largest, most authoritative online legal
resource in France
29275_SAS_p007-040.indd 30
07/03/2014 18:14
Reed Elsevier Annual Reports and Financial Statements 2013
31
New workflow and analytical tools and content sets are regularly
introduced on Lexis Advance. For example, in 2013 LexisNexis
launched MedMal Navigator, a workflow tool that integrates
medical and legal research with case facts, assisting attorneys in
determining their course of action. Also, LexisNexis launched new
modules for Lexis Practice Advisor, a web-based practical guidance
product tailored for attorneys who handle transactional matters.
Additionally, LexisNexis strengthened its core content offering
through the acquisitions of Sheshunoff and A.S. Pratt and
analytical titles from Oxford University Press – providing attorneys
with enhanced information in online and ebooks formats.
In litigation solutions, LexisNexis launched its web-enabled Early
Data Analyzer which enables users to determine the nature and
amount of relevant data in a lawsuit at its source location.
Additionally, LexisNexis released a new version of Concordance
Evolution supporting the direct import of files from LAW
PreDiscovery – reducing time, costs and storage needs by
streamlining electronic discovery workflow.
LexisNexis Business of Law Software Solutions provides law
firms with practice management solutions, including time and
billing systems, case management, cost recovery and document
management services.
In August 2013, LexisNexis Martindale-Hubbell and Internet
Brands announced the set-up of a joint venture, bringing together
Martindale-Hubbell lawyer directory, including Lawyers.com, with
Internet Brands’ online marketing services for lawyers.
In International markets outside the US, LexisNexis serves legal,
corporate, government, accounting and academic markets in
Europe, Canada, Africa and Asia Pacific with local and
international legal, regulatory and business information. The
most significant businesses are in the UK, France, Australia,
Canada and South Africa.
LexisNexis focuses on providing customers with leading
collections of content and innovative online solutions to help legal
and business professionals make better decisions more
efficiently. Penetration of online information services has grown
strongly and electronic solutions now account for 60% of revenue
outside the US.
In the UK, LexisNexis is a leading legal information provider
offering an unrivalled collection of primary and secondary
legislation, case law, expert commentary, and forms and
precedents. Its extensive portfolio includes a number of heritage
brands: Halsbury’s, Tolleys and Butterworths. The content is
delivered through multiple formats – from print to online to mobile
apps and embedded in customers’ workflow.
In 2013, LexisNexis launched additional modules for the UK
LexisPSL product suite which provides lawyers a single
destination for their practical legal information needs with direct
links to the relevant cases, legislation, precedents, forms,
practical guidance and expert commentary. Similar practical
guidance services were launched in Canada, South Africa
and Australia.
In France, LexisNexis is a leading online provider of information to
lawyers, notaries and courts. A heritage brand JurisClasseur and
leading authoritative content is provided through multiple formats
– lexisnexis.fr, mobile and in print. These content sources are, as
in the UK, being combined with new content and innovative
workflow tools to develop practical guidance and practice
management solutions. In 2013, LexisNexis France continued to
enhance Lexis 360, the first semantic search online tool combining
legal information, practical content and results from the web by
providing tailored solutions for the notary market.
Following the success of Lexis for Microsoft Office (LMO) in the US
and Canadian markets, an Australian version was launched in
2013. LMO enables customers to access LexisNexis content and
services via add-ins/toolbars within Microsoft Word and Outlook.
In 2013, LexisNexis Legal & Professional strengthened its
positions in Asia through acquisitions and enhanced products
created specifically for legal professionals and practitioners,
corporate counsels, legal researchers and government
institutions in markets including India, China and Japan. In China,
LexisNexis acquired LegalStudio, a leading provider of model
contracts and practical guidance, strengthening its position in
high-growing Corporate and Intellectual Property practice areas.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET
£1,567m
Print
23%
Face-to-face
1%
£1,567m
Rest of World
11%
Europe
21%
Electronic
76%
North America
68%
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 31
07/03/2014 10:47
m
a
t
i
o
n
32
BUSINESS REVIEW
LEGAL
Market opportunities
Longer-term growth in legal and regulatory markets worldwide is
driven by increasing levels of legislation, regulation, regulatory
complexity and litigation, and an increasing number of lawyers.
Additional market opportunities are presented by the increasing
demand for online information solutions and practice
management tools that improve the quality and productivity of
research, deliver better legal outcomes, and improve business
performance. Notwithstanding this, legal activity and legal
information markets are also influenced by economic conditions
and corporate activity, as has been seen with the dampening
impact on demand of the recent global recession and the
somewhat subdued environment that followed in North America
and in Europe.
Strategic priorities
LexisNexis Legal & Professional’s strategic goal is to enable
better legal outcomes and be the leading provider of productivity-
enhancing information and information-based workflow solutions
in its markets. To achieve this LexisNexis is focused on introducing
next generation products and solutions on the global New Lexis
platform and infrastructure; leveraging New Lexis globally to
continue to drive print to electronic migration and long-term
international growth; and upgrading operational infrastructure,
improving process efficiency and gradually improving margins.
In the US, LexisNexis’ focus is on the continuing development of
next generation legal research and practice solutions. It is also
conducting a major upgrade in operations infrastructure and
customer service and support platforms. This will provide
customers with an integrated and superior experience across
multiple products and solutions. Over the next few years
progressive product introductions, often based on the New Lexis
platform, leveraging big data HPCC technology, will combine
advanced technology with enriched content, sophisticated
analytics and applications to enable LexisNexis’ customers to
make better legal decisions and drive better outcomes for their
organisations and clients.
Outside the US, LexisNexis is focused on growing online services
and developing further high-quality actionable content and
workflow tools, including the development of practical guidance
and practice management applications. In 2014, LexisNexis will
continue to introduce New Lexis globally. Additionally, LexisNexis
is focusing on the expansion of its activities in emerging markets.
Business model, distribution channels and competition
LexisNexis Legal & Professional products and services are
generally sold directly to law firms and to corporate, government,
accounting and academic customers on a paid subscription basis,
with subscriptions with law firms often under multi-year contracts.
Principal competitors for LexisNexis in US legal markets are
West (Thomson Reuters) and CCH (Wolters Kluwer). In news
and business information they are Bloomberg and Factiva
(News Corporation). Competitors in litigation solutions also
include software companies. Significant international competitors
include Thomson Reuters, Wolters Kluwer and Factiva.
LEXIS ADVANCE US LEGAL CUSTOMER PENETRATION
MOBILE DOCUMENT ACCESSES
73%
45%
143%
2012
2013
2012
2013
Increasing uptake of next generation legal platform.
Increasing use of Lexis Advance and lexis.com mobile content.
29275_SAS_p007-040.indd 32
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
33
Revenue
Adjusted operating profit
2013
£m
1,567
238
2012
£m
1,610
234
Change
–3%
+2%
Change at constant
currencies
–4%
+1%
Change
underlying
+1%
+5%
The 2013 results reflect the impact of portfolio reshaping over
the last 18 months, including the disposal of the US document
retrieval and filing business in late 2012 and other small print
assets early in 2013. In the second half of 2013 LexisNexis
Martindale-Hubbell, the US lawyer directory, was spun out into
a joint venture with Internet Brands, a broad-based internet
marketing firm.
2014 Outlook
We will continue the roll out of our new technology platforms
and products in 2014, and will maintain our focus on process
improvement. Our customer markets remain subdued, however,
limiting the scope for underlying revenue growth.
2013 financial performance
Positive underlying revenue growth was maintained in 2013
despite subdued market conditions in the US and Europe.
Electronic revenues continued to show good growth, largely
offset by print declines.
Underlying revenues grew 1%, and underlying operating profits
grew 5%.
In the US and in our major European markets, conditions remained
subdued, with growth in online solutions largely offset by
continued print declines. Other international markets achieved
good growth.
The roll out of new product releases continued, with 73% of US
legal customers activated on the New Lexis platform at period
end, and new product usage progressing well.
Ongoing process innovation and some initial decommissioning of
old infrastructure more than offset inflation and higher
depreciation, contributing to a 0.7 percentage point margin
improvement in 2013.
REVENUE
£m
ADJUSTED OPERATING PROFIT
£m
1,691
1,634
1,610
1,567
238*
229
234
238
2010
2011
2012
2013
2010
2011
2012
2013
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
*Comparative profit figures for 2010 are presented on a pro forma basis.
m
a
t
i
o
n
29275_SAS_p007-040.indd 33
07/03/2014 10:47
34
BUSINESS REVIEW
LEGAL
LEXIS ADVANCE:
FAST AND EASY EXPERT
INSIGHT AND ANALYTICS
The Clore Law Group, based in the US and
headquartered in Charleston, South Carolina,
handles sophisticated medical malpractice
lawsuits, advanced personal injury issues and
wrongful death claims.
The firm is noted for applying advanced trial science
to win settlements and jury trials for its clients.
Recognised for its innovative use of technology to
optimise case preparation and management, Clore
competes successfully against much larger firms
across the country.
Averaging 180 days on the road, Clore’s attorneys
depend on fast, reliable and comprehensive legal
information systems that they can access anytime to
research, assess, and present their cases. They use
the Lexis Advance portfolio of content, analytical and
productivity tools for trusted information and deep
legal insights: LexisNexis Verdict & Settlement
Analyzer enables them to compare similar verdicts
and settlements, LexisNexis MedMal Navigator
delivers their litigators analytics and insights into
related cases and medical issues, and LexisNexis
Profile Suite helps them identify and evaluate
expert witnesses.
About Lexis Advance
Lexis Advance provides lawyers
with essential information and
analytical tools covering all
aspects of their daily work. Built
on the innovative New Lexis
platform and powered by Reed
Elsevier’s HPCC big data
technology, the Lexis Advance
product portfolio is regularly
updated and expanded. Recent
additions include the expert
witness resource LexisNexis
Profile Suite, and the medical
malpractice research and
analytics solution LexisNexis
MedMal Navigator, which
combines LexisNexis’
comprehensive legal content
with Elsevier’s extensive health
information to help attorneys
understand the underlying
medical issues and related
points of law.
100%
more efficient
WITH MEDMAL NAVIGATOR,
THE CLORE LAW GROUP
FINDS EXPERT WITNESSES
IN HALF THE TIME.
TO BE A SUCCESSFUL
LITIGATOR, YOU NEED
TO STAY AHEAD OF THE
CURVE AND GET THE
INFORMATION AND
ANALYSIS YOU NEED AS
QUICKLY AS POSSIBLE.
Sam Allen
Litigator
Clore Law Group
29275_SAS_p007-040.indd 34
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
35
THERE IS NO OTHER PRODUCT
LIKE MEDMAL NAVIGATOR ON THE
MARKET TODAY THAT BRINGS
EVERYTHING TOGETHER FOR
ATTORNEYS. IT’S COMPREHENSIVE
AND COVERS EVERY ASPECT OF A
MEDICAL MALPRACTICE CASE.
Sam Allen,
Litigator, Clore Law Group
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p007-040.indd 35
07/03/2014 10:47
m
a
t
i
o
n
36
BUSINESS REVIEW
EXHIBITIONS
Exhibitions
We operate the world’s leading
exhibitions business, with 500
events in over 30 countries.
Reed Exhibitions’ portfolio of exhibitions and conferences serves
43 industry sectors across the globe. In 2013, Reed Exhibitions
brought together over 6m event participants from around
the world, generating billions of dollars of business and
facilitating entry into new markets for its customers and
boosting the local economies where the events are hosted.
Revenues for the year ended 31 December 2013 were £862m.
Reed Exhibitions is a global business headquartered in London
and has principal offices in Paris, Vienna, Norwalk (Connecticut),
São Paulo, Abu Dhabi, Beijing, Moscow, Tokyo, and Sydney.
Reed Exhibitions has 3,400 employees worldwide. In 2013,
approximately 16% of Exhibitions’ revenue came from North
America, 43% from Europe and the remaining 41% from the rest
of the world on an event location basis.
Reed Exhibitions organises market-leading events which are
relevant to industry needs, where participants from around the
world meet face-to-face to do business, to network and to learn.
Its exhibitions and conferences encompass a wide range of
sectors. They include construction, electronics, energy and
alternative energy, engineering, entertainment, gifts and
jewellery, healthcare, hospitality, interior design, logistics,
manufacturing, pharmaceuticals, real estate, recreation, security
and safety, transport and travel.
Market opportunities
Growth in the exhibitions market is influenced by both business-to-
business marketing spend and business investment. Historically,
these have been driven by levels of corporate profitability, which in
its turn has followed overall growth in GDP. Emerging markets and
higher growth sectors provide additional opportunities for Reed
Exhibitions. As some events are held other than annually, growth in
any one year is affected by the cycle of non-annual exhibitions.
Strategic priorities
Reed Exhibitions’ strategic goal is to understand and respond to its
customers’ evolving needs and objectives better than its
competition through deep knowledge of its customers and the
markets they serve.
Reed Exhibitions delivers a platform for industry communities to
conduct business, to network and to learn through a range of
market-leading events in growth sectors, especially in higher
growth geographies, enabling exhibitors to target and reach new
customers quickly and cost effectively.
Organic growth will be achieved by continuing to generate greater
customer value through the intelligent application of customer
knowledge, by developing new events, and by building out
technology platforms to ensure the rapid deployment of innovation
and best practices across the organisation. Reed Exhibitions is
also shaping its portfolio through a combination of strategic
partnerships and acquisitions in high-growth sectors and
geographies as well as by withdrawing from markets and
industries with lower long-term growth prospects.
International construction trade fair
International perfumery and cosmetics
exhibition
International exhibition of environmental
equipment, technologies and services
The world’s property market
Premier global event for the travel
industry
One of the largest business gifts and home
fairs in China
A world leading event for smart and
renewable energy
US home improvement and DIY trade fair
29275_SAS_p007-040.indd 36
07/03/2014 18:14
Reed Elsevier Annual Reports and Financial Statements 2013
37
Reed Exhibitions is committed to continually improving customer
solutions and experience. By providing a variety of services,
including its integrated web platform, the company continues to
drive customer satisfaction. Using customer insights, Reed
Exhibitions has developed an innovative product offering which
enhances the value proposition for exhibitors by broadening their
options in terms of the type and location of stand they take and the
timing of their commitment to the event.
In 2013 Reed Exhibitions launched 37 new events. These included
events which extended the geographical footprint of the luxury
travel brand, ILTM, to Africa and the art brand, Paris Photo, to
Los Angeles. Reed Exhibitions Japan responded again to customer
demand by replicating its Tokyo-based World Smart Energy Week
in Osaka. The UK-based event, Oceanology International, was
successfully launched in China through a collaborative effort
between the Chinese and UK teams. Regional strategies remain a
key element of building business in China and Brazil, taking more
events to China’s second tier cities and cloning events from
São Paulo to Recife in Brazil’s fast developing north east. Reed
Exhibitions now organises nearly 200 events in emerging markets.
A number of targeted acquisitions were completed during 2013.
These included the Capsule portfolio of contemporary fashion
events, located mainly in North America; Travelweek São Paolo,
a high-end travel event servicing premium buyers across Latin
America, and Expo Ferretera, the leading hardware event in
Mexico. Elsewhere, acquisitions were made to expand Reed
Exhibitions’ footprint in China and its global position in the
advanced materials sector. Reed Exhibitions also entered into a
partnership with Thebe Exhibitions, one of the leading events
companies in South Africa, to form Thebe Reed Exhibitions, which
will run a number of events, primarily in the travel and interior
design sectors.
Business model, distribution channels and competition
The substantial majority of Reed Exhibitions’ revenues are from
sales of exhibition space. The balance includes conference fees,
online and offline advertising, sponsorship fees and, for some
shows, admission charges. Exhibition space is sold directly or
through local agents where applicable. Reed Exhibitions often
works in collaboration with trade associations, which use the
events to promote access for members to domestic and export
markets, and with governments, for whom events can provide
important support to stimulate foreign investment and promote
regional and national enterprise. Increasingly, Reed Exhibitions is
offering visitors and exhibitors the opportunity to interact before
and after the show through the use of online tools such as
directories and matchmaking.
Reed Exhibitions is the global market leader in a fragmented
industry, holding less than a 10% global market share. Other
international exhibition organisers include UBM, Informa IIR and
some of the larger German Messe, including Messe Frankfurt,
Messe Düsseldorf and Messe Munich. Competition also comes
from industry trade associations and convention centre and
exhibition hall owners.
NUMBER OF EVENT LAUNCHES
EVENTS IN EMERGING MARKETS
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
37
30
192
165
G
o
v
e
r
n
a
n
c
e
2012
2013
2012
2013
Increase in events taking place in high-growth geographies through
launches and acquisitions.
REVENUE BY FORMAT
REVENUE BY GEOGRAPHICAL MARKET*
£862m
Print 1% Electronic 2%
£862m
Rest of World
41%
Face-to-face
97%
North America
16%
Europe
43%
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
*On an event location basis.
m
a
t
i
o
n
29275_SAS_p007-040.indd 37
07/03/2014 10:47
38
BUSINESS REVIEW
EXHIBITIONS
Revenue
Adjusted operating profit
* Excluding biennial exhibition cycling.
2013
£m
862
213
2012
£m
854
210
Change
+1%
+1%
Change at constant
currencies
+2%
+4%
Change
underlying
+2%/+7%*
+4%
2013 financial performance
In 2013 Exhibitions maintained strong underlying revenue
growth of 7% excluding the effect of biennial show cycling.
While growth in Europe was modest, the US, Japan, Brazil and
other markets all grew well.
Underlying revenues grew 2% (7% excluding biennial cycling),
and underlying adjusted operating profits grew +4%.
The US and Japan achieved strong revenue growth for the year.
US shows reported good growth in visitor numbers, and growth
in Japan was supported by leadership of the alternative energy
sector and new launches. Brazil and China continued to generate
strong growth.
In Europe good growth in international events more than offset
softness in some domestic continental European events, resulting
in modest overall growth.
In 2013 we launched 37 new events, primarily in high-growth
geographies and sectors, including the highly successful
launch of World Travel Market Latin America, building on
a global franchise.
We undertook a number of portfolio changes during the year, with
acquisitions including Expo Ferretera in Mexico, IPSA in Russia,
Travelweek São Paulo in Brazil and Capsule in the US. Disposals
include a number of Spanish events as well as some smaller
events across geographies.
The impact of biennial exhibition cycling has steadily been reduced
from 10% in 2011 through 8% in 2012, to 5% in 2013.
2014 Outlook
We expect good underlying growth in the US and Japan, and
limited growth in Europe. In other markets we expect growth to
remain strong, albeit at a slightly lower rate than in 2013. In 2014,
which is a “cycling-in” year, we expect the impact of cycling to be
further reduced to around 2 percentage points of growth.
REVENUE
£m
ADJUSTED OPERATING PROFIT
£m
854
862
693
707
210
213
158
167
2010
2011
2012
2013
2010
2011
2012
2013
29275_SAS_p007-040.indd 38
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
39
39
INTERNATIONAL
LUXURY TRAVEL
MARKET: BUILDING
GLOBAL BRANDS
Reed Exhibitions works collaboratively
across borders to leverage the strength
of the two most valuable assets in the
company – its people and its brands.
In 2013, Reed Exhibitions launched over a
dozen events by taking established brands
into new geographies.
Reed Exhibitions has sought to tap into the
changing dynamics of the luxury travel
market by expanding its highly regarded
International Luxury Travel Market (ILTM)
brand. The flagship ILTM event is held
annually at the Palais des Festivals et des
Congrès in Cannes and has been launched
into high-growth markets for inbound and
outbound tourism including Asia Pacific,
the Americas, Africa and Japan as well as
the spa and wellbeing sector.
EACH YEAR ILTM CONTINUES TO FAR EXCEED OUR
EXPECTATIONS. IT REALLY IS THE MOST EFFICIENT AND
EFFECTIVE WAY TO PROMOTE AND GAIN BUSINESS. THE
FOCUSED AND PROACTIVE APPROACH IN EACH OF THE
SHOWS ENSURES HIGH-QUALITY APPOINTMENTS ARE
MADE. THE PEOPLE YOU MEET ARE THE PEOPLE THAT
ARE TRULY SELLING LUXURY.
Steve Odell
President
Silversea Cruises
29275_SAS_p007-040.indd 39
07/03/2014 10:47
40
29275_SAS_p007-040.indd 40
07/03/2014 10:47
Reed Elsevier Annual Reports and Financial Statements 2013
Reed Elsevier Annual Reports and Financial Statements 2013
41
41
Corporate
Business review
responsibility
Dest que occusae vel ex
explant vendae id etur,
quo maximent, consed
mo temea commodita
similia tiatur simolor
O
O
v
v
e
e
r
r
v
v
i
i
e
e
w
w
B
B
u
u
s
s
i
i
n
n
e
e
s
s
s
s
r
r
e
e
v
v
i
i
e
e
w
w
The Corporate Responsibility Report is an
integral part of our Annual Reports and
Financial Statements. This section highlights
key achievements relative to our 2013 corporate
responsibility objectives. You can read the full
2013 Corporate Responsibility Report at
www.reedelsevier.com/go/CRReport
IN THIS SECTION
00 Elsevier
00 LexisNexis Risk Solutions
00 LexisNexis Legal & Professional
00 Reed Exhibitions
00 Reed Business Information
00 Corporate responsibility
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
r
r
e
e
v
v
i
i
e
e
w
w
G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
a
a
n
n
d
d
o
o
t
t
h
h
e
e
r
r
i
i
n
n
f
f
o
o
r
r
m
m
a
a
t
t
i
i
o
o
n
n
29275_SAS_p041-050.indd 41
07/03/2014 10:50
42
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
Corporate responsibility
Corporate responsibility ensures
good management of risks and
opportunities, helps us attract and
retain the best people, and
strengthens our corporate
reputation. It means performing to
the highest commercial and
ethical standards and channelling
our knowledge and strengths, as
global leaders in our industries,
to make a difference to society.
Constant engagement with stakeholders, including shareholders,
employees, governments, and communities in which we operate,
helps us determine material corporate responsibility issues.
The Reed Elsevier Boards, senior management, and the
Corporate Responsibility Forum oversee corresponding
objectives and monitor performance against them.
We concentrate on the contributions we make as a business
and on good management of the material areas that affect all
companies, encompassing:
1. Our unique contributions
2. Governance
3. People
4. Customers
5. Community
6. Supply chain
7. Environment
1. Our unique contributions
We focus on areas where we can make a positive impact on society
through our knowledge, resources and skills. This includes
universal sustainable access to information, advance of science
and health, protection of society, and promotion of the rule of law
and access to justice.
Elsevier, the world’s leading provider of scientific, technical, and
medical information, plays an important role in advancing human
welfare and economic progress through its science and health
information, which spurs the diffusion of innovation and enables
critical decision making. To ensure access to this information,
Elsevier supports key programmes in places where resources are
often scarce. Among them is Research4Life, a partnership with
United Nations agencies and other publishers; we provide core
and cutting-edge scientific information to researchers in more
than 100 developing countries. As a founding partner, we
contribute 25% of the content available in Research4Life,
encompassing all ScienceDirect content, including approximately
3,000 Elsevier journals and 12,000 books. In the year, there
were more than 3m Research4Life article downloads from
ScienceDirect. Research undertaken by Elsevier in 2013 shows
African authors have nearly doubled their output of research
articles over the past decade, aided by programmes like
Research4Life. In addition to support for ongoing projects, the
Elsevier Foundation committed $700,000 to libraries, new
scholars, and nurses, including a grant to the Mariners’
Polytechnic Colleges Foundation of the Philippines.
LexisNexis Risk Solutions tools and resources help protect
society. During the year, it launched Social Media Monitor, a new
capability within its Accurint for Law Enforcement platform, to
assist law enforcement officials with investigations into critical
incidents such as gang violence, drug dealing, crimes against
children, and human trafficking. Social Media Monitor allows law
enforcement personnel to identify posts and tweets by keyword
and geographic location as an additional resource alongside
traditional public records data. The business unit’s analytic
technology also helps governments fight fraud. In the year,
LexisNexis Risk Solutions partnered with investigators, Tax
Management Associates, Inc., to help Greenville County, South
Carolina recover nearly $3m in revenue by detecting fraudulent
tax exemption filings, including individuals receiving exemptions
under the names of deceased property owners. A study
commissioned in 2013 by LexisNexis Risk Solutions using its
Fraud Multiplier tool, calculated the actual cost of US fraud –
retailers lost $279 for every $100 of fraud, attributable to fees and
interest owed to financial institutions, charge-backs, and other
replacement costs. The study advocated greater awareness of the
wide range of fraud schemes, particularly those associated with
online purchases.
Reed Business Information (RBI) uses the power of its brands to
aid communities. In 2013, RBI’s Community Care drew attention to
shortcomings in England’s mental health provision in a joint
investigation with the BBC. This led the UK government’s Care
Services Minister to pledge an end to "institutional bias against
mental health" in the National Health Service. ICIS, an RBI service
providing news and market intelligence to the chemicals, energy,
and fertiliser sectors, held its 10th Innovation Awards in 2013 to
reward industry innovation.
29275_SAS_p041-050.indd 42
07/03/2014 10:50
43
More than three-quarters of abducted
children who are murdered are killed
within the first three hours after
their disappearance.
This terrifying reality led a team of
LexisNexis Risk Solutions employees to
develop the Automated Delivery of Alerts
on Missing Children (ADAM) Program,
which assists in the safe recovery of
missing children. The initiative’s name is
also in memory of a six-year old boy, Adam
Walsh, who was kidnapped in 1981. ADAM
alerts circulate missing child posters in
minutes – more than 2m in 2013 – to police,
news media, schools, businesses, medical
centres, and other recipients within a
specific geographic search area. Since
launching in 2000, 139 children have been
located, including four in 2013. ADAM is
designated for use by the National Center
for Missing and Exploited Children
(NCMEC) in the US. The colleagues behind
ADAM exemplify the Reed Elsevier values
of innovation, boundarylessness, and
valuing people.
Reed Elsevier Annual Reports and Financial Statements 2013
ADAM PROGRAM:
BRINGING HOME
MISSING CHILDREN
WE ARE GRATEFUL TO LEXISNEXIS FOR ITS LONG-
STANDING COMMITMENT TO HELPING FIND MISSING
CHILDREN THROUGH THE ADAM PROGRAM. BY ENABLING
THE RAPID DISTRIBUTION OF PHOTOGRAPHS, THEY
ARE HELPING BRING MISSING CHILDREN HOME AND
DELIVERING HOPE TO THEIR FAMILIES.
John Ryan
CEO, National Centre for
Missing and Exploited Children
139
children recovered
since 2000
29275_SAS_p041-050.indd 43
07/03/2014 10:50
44
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
Boston-based Cabot Corporation was chosen overall winner and
winner of the Innovation with Best Environmental Benefit award
for its aerogel building insulation technology (lightweight, silica
materials consisting of 90% air which prevent heat transfer)
which increases energy efficiency and cost savings, and reduces
carbon footprints.
LexisNexis Legal & Professional promotes justice through its
products and services. In 2013, in association with the Atlantic
Council, it launched a draft set of Global Rule of Law Business
Principles to help businesses, law firms, non-governmental
organisations, and other institutions promote and uphold the rule
of law. In conjunction with the launch, the first-ever LexisNexis
Rule of Law Awards were awarded to UN Secretary-General Ban
Ki-moon, former President of Ireland, Mary Robinson, and former
President of the American Bar Association, Laurel Bellows, all of
whom have each made significant contributions to the rule of law
around the world. Aung San Su Kyi, Chair of the National League
for Democracy and Parliamentary Rule of Law and Tranquility
Committee (Pyithu Hluttaw), also received an inaugural award
and accepted from Myanmar. LexisNexis Legal & Professional will
be working with the UN to refine and advance the Principles in the
year ahead. In 2013, staff in South Africa launched the Human
Trafficking Awareness Index, building on a tool developed by UK
colleagues in 2012. It uses the business unit’s Nexis news service
to highlight emerging trends within and across national borders to
aid campaigners and the South African Police Service in their
efforts to combat trafficking.
Reed Exhibitions’ trade shows provide platforms for supporting
our corporate responsibility focus areas. During the 2013 PSI
Trade Show, the leading European show for the promotional
products industry, Reed Exhibitions, with the European
Promotional Products Association (EPPA), launched the EPPA
Certification Program for CSR. The aim is to help industry
companies comply with laws and regulations and International
Labor Organization standards. At the 2013 World Travel Market,
its global event for the travel industry, Reed Exhibitions hosted
World Responsible Tourism Day with events available to the
show’s more than 50,000 attendees on topics ranging from
poverty reduction to wildlife protection and reducing greenhouse
gas emissions. Over the past 10 years, Reed Exhibitions has given
free space at the London Book Fair to Book Aid International,
which annually provides more than 500,000 books – including
those donated from across Reed Elsevier – to readers in the
developing world, enabling the charity to engage with a wide range
of potential book and financial donors.
Drawing on expertise in alternative energy across Reed Elsevier,
in 2013, we launched the Alternative Energy Roundtable to
facilitate cross-business understanding of our products and new
developments in alternative energy. At meetings held during the
year, more than 30 colleagues from our business units discussed
topics such as emerging markets, R&D, and customer
engagement. In addition, it was the theme of our 2013 CR Forum
Stakeholder Session with internal and external specialists,
including Jan Paul Grollé, Elsevier’s Managing Director of
Alternative Energy; Richard Sobelsohn, LexisNexis Legal &
Professional’s Director of Content and Product Initiatives; Blaine
Collison, Director of the US Environmental Protection Agency’s
Green Power Partnership; and Professor Jinyue Yan, Director of
Future Energy at Sweden’s Royal Institute of Technology.
During the year, we progressed our collaboration with UNICEF on
the report, Social protection, Disaster Risk Reduction, and Climate
Change Adaptation in East Asia and the Pacific, providing access to
content and subject experts, and editorial assistance. The report,
featuring in-depth case studies from Thailand and the Philippines,
was profiled at a workshop for corporate peers and NGOs to
advance awareness of climate change resilience. A follow-up
workshop will be held in 2014 for academics, practitioners, and
policymakers to explore translating the report’s findings into
programming and policy for children in East Asia and the Pacific.
2013 OBJECTIVES
Progress
New partnerships through
Reed Elsevier Environmental
Challenge to share water and
sanitation expertise
Create cross-business
alternative energy round table
to foster knowledge sharing
and product development
Deliver workshops with
UNICEF on child-centred
climate change adaptation in
high-risk locations
Partnership with Dutch
WASH Alliance:
Funded $15,000 third
prize and collaboration
on 2013 prize ceremony
at World Water Week in
Stockholm
Provided judge and
reviewers
Contributed $2,500 for
training to advance
winners’ personal
development
Over 30 cross-business
participants
Meetings on emerging
topics; also presentations
by internal/external
experts
Renewable energy
industry event planned
Hosted workshop for
corporate peers and
NGOs to advance
awareness of climate
change resilience,
focusing on Philippine
case study in the wake
of Typhoon Haiyan
Continued in-kind
assistance including
access to information,
subject experts, and
editorial support
2014 OBJECTIVES
Partner with United Nations Global Compact to refine and
launch stakeholder consultation on the Global Rule of Law
Business Principles
Develop media and/or academic partnership to further
awareness and engagement with the Reed Elsevier
Environmental Challenge
Collaboration with Oxfam to advance the Raising Her Voice
women’s leadership programme in Nepal
29275_SAS_p041-050.indd 44
07/03/2014 10:50
Reed Elsevier Annual Reports and Financial Statements 2013
45
2013 OBJECTIVES
Progress
Achieve 100% completion of all
computer-based compliance
courses
100% completion
achieved within six
months of issuance
Advance Record Management
Policy implementation and roll
out translations
Translations completed
and disseminated to
relevant employees
Enhanced training programme
for internal investigators of
Code of Ethics and Business
Conduct breaches
Implementation
guidelines and tools
available in multiple
languages; ongoing
collaboration with
business unit teams
Completed training of US
HR personnel, data
privacy and security
investigators, and
Corporate Audit Services
representatives.
2014 training of HR
representatives outside
the US planned
2014 OBJECTIVES
Implement updated corporate governance policies
Conduct a review and refresh of the Reed Elsevier Code of
Ethics and Business Conduct
Evaluate Reed Elsevier’s Export and Trade Controls Policy
and compliance efforts
2. Governance
The Reed Elsevier Code of Ethics and Business Conduct (The Code)
is disseminated to every employee, setting the standard for our
corporate and individual conduct. It covers topics such as fair
competition, anti-bribery, conflicts of interest, employment
practices, and protecting intellectual property. It also encourages
the reporting of violations, and prohibits retaliation. The Code
makes clear our commitment to human rights, incorporating the
principles of the United Nations Global Compact (UNGC). In
accordance with the UN’s Guiding Principles on Business and
Human Rights, we have considered where and how we operate and
have concluded that there is low human rights risk in our direct
employment activities (for more information on human rights see
Supply Chain).
All employees complete training on the Code, both as part of their
new hire induction and at regular intervals, to update their
understanding and acknowledgement of the Code. We also
provide mandatory online training on anti-bribery, competition
laws, protecting data, and preventing workplace harassment,
supplemented by in-person training for higher risk roles.
We achieve 100% completion rates for all courses within six
months of issuance.
In 2013, we remained diligent in our ongoing efforts to ensure
compliance with applicable bribery laws, including the UK Bribery
Act and US Foreign Corrupt Practices Act, through intermediary
due diligence and monitoring, strict limits on gifts, hospitality and
gratuities, and employee awareness efforts, among other steps.
Also this year, we developed employee training on intellectual
property and using social media, and enhanced internal
investigation procedures and training of investigators for all types
of alleged employee misconduct. We also translated our Record
Management Policy, Record Retention Schedule, and related
resources for non-English-speaking employees to help them
properly manage company records.
As a signatory to UNGC and its principles, encompassing labour,
environment, anti-corruption, as well as human rights, we
demonstrated leadership in 2013 by serving on the UNGC Advisory
Group for the UK and the UNGC Supply Chain Advisory Group.
We were also part of the UNGC’s CEO Water Mandate Steering
Group and represented the initiative on the board of the Alliance
for Water Stewardship. A member of the UNGC Caring for
Climate Advisory Group, we participated in the Caring for Climate
Business Forum in Warsaw, held during the UN Climate Change
Conference (COP 19), to support innovation and collaboration on
climate action. The UNGC judged our 2013 Communication on
Progress, required of signatories each year, to have attained
Advanced Level. In the year, we provided content for the UNGC
Lawyers as Leaders video series, and hosted UNGC meetings in
London and New York.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p041-050.indd 45
07/03/2014 10:50
m
a
t
i
o
n
46
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
3. People
Our 28,200 people are our strength. Our workforce is 53% female
and 47% male, with an average length of service of eight years.
There were 44% female and 56% male managers and 30% female
and 70% male senior operational managers.
The Reed Elsevier Nominations Committee considers the
knowledge, experience and background of individual Board
Directors. By year end 2013, women made up 30% of the members
of the Reed Elsevier NV Board and 22% of the members of the
Reed Elsevier PLC Board. The two Executive Directors of the
Board, who constitute senior management, are male.
The Reed Elsevier Diversity and Inclusion (D&I) Statement
(www.reedelsevier.com/go/Diversity), articulates our
commitment to a diverse workforce and environment that
respects individuals and their contributions, regardless of their
gender, race, or other characteristics. Our D&I Strategy is focused
on translating the Statement into practical action. Among its
commitments is maintaining a D&I Advisory Group comprised of a
senior business and HR leader from each business unit, supported
by a broader D&I Working Group. We expanded D&I training in the
year, with in-person sessions for Elsevier managers in six US
cities; online training for LexisNexis Risk Solutions US managers;
in-person sessions for LexisNexis Legal & Professional UK
managers, and Reed Elsevier head office managers. Course
content includes making the business case for D&I on ethical,
economic, regulatory, and reputational grounds. We encourage
both affinity groups, such as women’s forums, which provide
support and mentoring, and community involvement.
In 2012, we conducted a global Employee Opinion Survey (EOS) to
understand how our people view Reed Elsevier. We donated $1 for
every completed survey to our global fundraising effort for Plan
UK focused on education for girls in Peru and pre-school
education for ethnic minority children in China, and had 77% EOS
participation. Overall, employees rate Reed Elsevier as a company
that employs strong, ethical principles in its business practices
with improved scores since the last survey in 2009 in overall
satisfaction, innovation, and customer focus. Local action plans
led by managers have been undertaken in all business units; at
LexisNexis Risk Solutions for example, follow-up has included
focus groups and manager coaching, and senior leaders have key
performance objectives to improve EOS and pulse survey (shorter,
more frequent staff polling) results.
Our employees have the right to a healthy and safe workplace as
outlined in the Reed Elsevier Global Health and Safety Policy. We
concentrate on areas of greatest risk, for example, warehouses,
events, and exhibitions. However, as a primarily office-based
company, our key impact areas are manual handling, slips, trips
and falls. To reduce our severity rate (lost days per 200,000 hours
worked), we conduct risk assessments, and work with a third
party in the US to assign a nurse case manager to each complex or
severe claim. The number of lost time reportable cases decreased
in the year (36 in 2013 vs 49 in 2012).
In the US, where we have our largest concentration of employees,
the REACH programme promotes workplace wellbeing through
health screenings, online assessments, stress awareness
training, and weight loss and smoking cessation programmes,
with financial incentives for participation. In 2013, we have
launched a health coach programme to provide personalised
support, available to all US employees. Of them, 226 have made
contact with a coach for help with issues such as diet, exercise,
and smoking cessation, and 2,808 calls were made to Care
Connect, a health concierge service.
Our annual re:fit2win global wellbeing competition encourages
employees to establish fitness teams to compete for cash prizes
for the charities of their choice. Across Reed Elsevier 79 teams
took part and ran, walked, cycled and swam a total of 73,382 miles/
118,097 kilometres, with an increase of 50 miles/80 kilometres
per person over 2012.
2013 OBJECTIVES
Progress
Expand diversity and inclusion
training across business units
Follow up on global Employee
Opinion Survey results
Institute health coach
programme to provide
personalised support to staff
Training expanded
across the US and into
the UK
Extensive efforts across
all business units;
tracking improvements
in interim pulse survey
scores
2,808 calls logged; 226
staff engaged in a
lifestyle management
programme
2014 OBJECTIVES
Sign up to the UN Women’s Empowerment Principles;
review practice relative to Principles
Develop inclusive leadership as a core management
competency
10% increase in re:fit2win participants
4. Customers
In 2013, we surveyed approximately 500,000 customers through
Net Promoter Score (measuring customer loyalty) and business
dashboard programmes. This allows us to deepen understanding
of their needs and further drives forward a customer-centric
culture across Reed Elsevier. Results, reviewed by the CEO and
senior operational managers and communicated to staff, highlight
where we are doing well and where we must do better. To aid
colleagues who work with customers, during the year, we have
worked to incorporate CR into customer-facing staff training with
outreach to key sales and marketing teams. We have updated our
intranet resource, CR as a Sales Tool; created a CR Fast Facts
document for distribution across the business; and developed new
CR Sales Academy content.
In the year, we shared the Reed Elsevier Editorial Policy with all
employees in an email from the Chief Legal Officer and Company
Secretary highlighting its importance and key provisions,
including our responsibility to make clear distinctions between
fact and opinion and user-generated or other content. With help
from our cross-business Editorial Policy Working Group, we
created a new section of our global intranet with input from our
editors and others who have shared what the principles mean to
them and their businesses.
29275_SAS_p041-050.indd 46
07/03/2014 10:50
Reed Elsevier Annual Reports and Financial Statements 2013
47
BY SHARING OUR
INFORMATION, EXPERTISE,
AND NETWORKS THROUGH
THE REED ELSEVIER
ENVIRONMENTAL
CHALLENGE, WE HELP
INDIVIDUALS AND
ORGANISATIONS ADVANCE
ACCESS TO SAFE WATER
AND SANITATION.
Youngsuk ‘YS’ Chi
Director of
Corporate Affairs
ENVIRONMENTAL
CHALLENGE:
ADVANCING ACCESS
TO SAFE WATER
AND SANITATION
The Reed Elsevier Environmental
Challenge advances sustainable access
to safe water and sanitation where it is
presently at risk.
The $25,000 2013 second prize winner
was Gadgil Laboratory at UC Berkeley,
for its scalable arsenic remediation of
groundwater project in South Asia.
Projects must be innovative, scalable,
involve local communities, and address
issues such as health, education, and
non-discrimination. The $50,000 2013
first prize winner was WaterSHED, an
NGO which works with local enterprises
and governments to develop sustainable,
market-based approaches to effective
water and sanitation provision in
Cambodia, Laos and Vietnam.
For the first time, a $15,000 WASH Alliance
prize was awarded to the third place
finisher, Text to Change, for a project
mapping Uganda’s water points using
smart phone technology in order to alert
water providers when repairs are needed.
The WASH Alliance is a consortium of six
Dutch NGOs promoting hygienic use of
sustainable water and sanitation.
A WaterSHED project in Cambodia.
$240,000
awarded over the
past three years
Text to Change uses mobile technology to benefit communities in Africa, South America, and Asia.
29275_SAS_p041-050.indd 47
07/03/2014 10:50
48
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
We are committed to improving access to our products and
services for all users, regardless of physical ability. In 2013, we
consulted on a new Reed Elsevier Accessibility Policy that aims to
lead the industry in providing accessibility solutions to customers,
while contributing to international standards with products that
are operable, understandable, and robust. The Accessibility Policy
was formally launched to all managers before the close of the
year, with a launch in early 2014 to all employees by the Chief
Strategy Officer. In 2013, members of the Accessibility Working
Group logged over 80 accessibility projects and Elsevier’s Global
Books Digital Archive fulfilled more than 4,000 disability requests,
60% of them through AccessText.org, a service it helped establish.
2013 OBJECTIVES
Progress
Incorporate corporate
responsibility component into
regular customer-facing staff
training
Embed updated Editorial Policy
Engagement of key sales
and marketing teams
Updated intranet resource,
CR as a Sales Tool
Created a CR Fast Facts
document for distribution
across the business
Developed new CR Sales
Academy content
Launched by Chief Legal
Officer and Company
Secretary in a
communication to all
employees
New Editorial Policy
resource created on
global intranet with
input from editors and
others across the
business
Consult on Reed Elsevier
Accessibility Policy and begin
implementation
Consultation with Reed
Elsevier Accessibility
Working Group
Launched to managers
across the company
Chief Strategy Officer
named senior
accessibility champion;
engaged business unit
chief technology officers
2014 OBJECTIVES
Roll out translations of the Reed Elsevier Editorial Policy;
launch related Reed Elsevier Data Quality Standards
Create CR ‘blueprint’ to help sales staff enhance their
customer conversations; put CR on the agenda at five key
sales conferences
Embed Accessibility Policy and conduct accessibility review
of at least 10 key product sites
5. Community
RE Cares, our global community programme, promotes education
for disadvantaged young people aligned with our unique
contributions as a business, and allows staff up to two days’ paid
leave per year for their own community work. We donated £2.5m in
cash (including through matching gifts) and the equivalent of
£3.1m in products, services, and staff time in 2013. 31% of
employees were engaged in volunteering through RE Cares and
we reached more than 17,000 disadvantaged young people
through time, in-kind, and cash donations. In the year, we
spotlighted the benefit of skills-based volunteering through
awareness-raising campaigns, RE Cares on the global intranet,
and the involvement of 172 cross-business RE Cares Champions.
Each September, we hold RE Cares Month to celebrate our
community activities and in 2013, 56% of Reed Elsevier locations
around the world were involved. Among them, LexisNexis Legal &
Professional New Zealand ran a Live Below the Line Challenge;
staff attempted to live on $2.25 per day (the extreme poverty line)
for a week, with funds they would have spent on food donated to
Habitat for Humanity to aid poor families. Reed Elsevier
Philippines held a science fair for 51 students at their office.
During RE Cares Month, we held our annual global book drive
yielding more than 9,200 books for local and developing world
readers, and announced the winners of the third Recognising
Those Who Care Awards to highlight the contributions to RE Cares
of eight individuals and four RE Cares teams. Individual winners
from across the business spent a week with Afrikids, a child rights
organisation working to raise standards for children in Northern
Africa, which Reed Elsevier has supported for 10 years. The trip
was led by one of Reed Elsevier’s senior leaders, Youngsuk “YS”
Chi, Director of Corporate Affairs. Among the winning teams was
the Amsterdam Slootermeer School Project Group, comprised of
30 Elsevier, RBI, and LexisNexis Legal & Professional volunteers
who help children with reading skills on a weekly basis, and the
RBI Skokie, Illinois Accuity in Action Team, which over a 12 month
period organised 22 volunteer programmes to benefit staff and
the local community.
2013 OBJECTIVES
Progress
Skills-based Two Days volunteer
drive (all staff have two days
each year for community work of
their own choosing)
Drive consisted of
awareness-raising
efforts – collateral,
intranet content, and the
involvement of 172 RE
Cares Champions
across the business
25% of locations involved in RE
Cares Month
56% achieved
2014 OBJECTIVES
Increase use of Two Days volunteering by 10%
Expand RE Cares Champions network and create new
induction programme
29275_SAS_p041-050.indd 48
07/03/2014 10:50
Reed Elsevier Annual Reports and Financial Statements 2013
49
6. Supply chain
7. Environment
We require our suppliers to meet the high standards we set for
ourselves. Our Supplier Code of Conduct stipulates adherence to
all laws and best practice in areas such as human rights, labour,
and the environment. Through our Socially Responsible Supplier
(SRS) database, in 2013, we tracked 613 critical, preferred and
strategic suppliers, and those we deem high risk according to
criteria encompassing the Corporate Executive Board’s Global
Country Analysis Support Tool, human trafficking data from the
US State Department, and the Environmental Performance Index
produced by Yale University and Columbia University. The tracking
list changes year-on-year based on the number of suppliers we do
business with who meet the required criteria. We started 2013
with 51% of suppliers on the SRS tracking list as signatories to the
Supplier Code and reached 79% by year end. We have embedded
signing the Supplier Code into our e-sourcing tool as one of the
criteria for doing business with us and an additional 2,784
suppliers have signed up.
Specialist supply chain auditors undertook 56 external audits of
high-risk suppliers in 2013. Any incidence of non-compliance with
the Supplier Code identified in the audit process triggers a
corrective action plan with supplier remediation required on all
issues. In the year, we began using our external audit partner’s
Workplace Conditions Assessment template to benchmark
high-risk supplier audit performance.
We developed a new US Supplier Diversity Plan in 2013 to identify
and create opportunities for diverse suppliers. Among its
provisions is providing successful and non-awarded diverse
suppliers with feedback after competitive bidding and capacity
building opportunities.
2013 OBJECTIVES
Progress
78% of key suppliers as
Supplier Code of Conduct
signatories
55 external audits of high risk
suppliers
Develop new US Supplier
Diversity Plan
2014 OBJECTIVES
79% (487 of 613 key
suppliers); 2,784 other
Supplier Code
signatories
56 completed
Plan and
implementation
process developed
Our targets reflect our performance and key issues and can be
found along with full details in the 2013 Corporate Responsibility
Report at www.reedelsevier.com/go/CRReport.
We attained 40% of our electricity from renewable sources in
the year and were ranked among the top FTSE 350 companies for
disclosure and performance in the 2013 CDP Leadership Index,
representing 722 investors with assets of $87,000bn.
Our Environmental Champions network, employee-led Green
Teams, and engagement through networks such as Publishers
database for Responsible Ethical Paper Sourcing, inform how we
address our environmental impact. Among them is the Reed
Elsevier Environmental Standards programme, which sets
benchmark performance levels and inspires green competition
among offices. In 2013, 77 sites (64% of key locations) achieved five
or more standards attaining green status. Reed Elsevier’s Chief
Financial Officer wrote to all staff recognising their achievement
on World Environment Day and also identified Green Heroes
across the company, nominated by their peers for their
environmental efforts.
We have a positive environmental impact through our
environmental publications and services which spread good
practice, encourage debate, and aid researchers and decision
makers. The most recent results from independent Market
Analysis System show our share of citations in environmental
science represented 40% of the total market, and 81% in energy
and fuels. In the year, we mapped the range of Reed Elsevier
environmental products and services which includes 490
products encompassing topics such as ocean and coastal
management, forestry, environmental law, waste management,
and trade shows on environmental engineering, renewable
energy, and water.
2013 OBJECTIVES
Progress
35% of electricity from
renewable energy or offsets
60% of key locations to achieve
five or more updated RE
Environmental Standards
40% achieved
64% achieved (77
locations vs. 69 in 2012)
Map range of Reed Elsevier
environmental products
and services
490 products identified;
information shared
across the business
Supplier Code of Conduct incorporated into terms and
2014 OBJECTIVES
conditions of purchase orders
Expand use of Workplace Conditions Assessment tool to
enhance high-risk supplier audits
Implement new US Supplier Diversity programme
45% of electricity from renewable energy or offsets
70% of key locations to achieve five or more RE
Environmental Standards
Expand Green Heroes programme recognising employee
action
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p041-050.indd 49
07/03/2014 10:50
m
a
t
i
o
n
50
BUSINESS REVIEW
CORPORATE RESPONSIBILITY
KEY ENVIRONMENTAL PERFORMANCE INDICATORS
Climate change
Scope 1
Scope 2
Office energy use intensity
Percentage of energy from
renewable or offset
Average data centre Power
Usage Effectiveness (PUE)
Percentage of key locations
in water stressed areas
achieving usage of 10m3 of
water per person per year
Waste diverted from landfill
Energy
Water
Waste
Target
2015 vs 2010
–20% intensity
–10% intensity
–20% intensity
50% absolute
1.69 absolute
100% absolute
75% absolute
Intensity
achievement
to date
2013 vs 2010
–11%
–25%
–26%
Absolute
achievement
to date
2013 vs 2010
–11%
–25%
2013
Absolute
figure
11,810 tCO2e
111,036 tCO2e
2013
Intensity figure
(per £ million
turnover)
1.96 tCO2e
18.40 tCO2e
–27%
107,951 MWh
17.89 MWh
40%
77,384 MWh
1.68
107,265 MWh
67%
69%
20 locations
7,156 tonnes
We have reported on all emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Report),
Regulations 2013. These sources fall within our consolidated financial statement. We do not have responsibility for any emission
sources not included in our consolidated statement.
We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) and the data has been assured by an
independent third party. Further details of methodology and the assurance statement can be viewed in the 2013 Corporate Responsibility
report at www.reedelsevier.com/go/CRReport.
Recognition in 2013 included:
Business in the Community
CR Index
– Platinum status
CDP Performance and
Disclosure Leadership
Indices
– included
ECPI Ethical Funds
– included
Dow Jones Sustainability
Indices
– included
Ethibel Pioneer and
Ethibel Excellence
Investment Registers
– included (reconfirmed
October 2013)
FTSE4Good Index
– included
UK National Business
Awards
– Sustainability Awards
finalist
Oekom
– best media company
for sustainability of
46 companies
Vigeo top 20
– Benelux region
RobecoSAM Sustainability
Yearbook 2013
– media sector sustainability
leader runner up
Triodos Sustainable
Equity/Bond Fund
– Best in class in the
publishing sector
Natural Capital Leaders
Index
– included
THE FULL 2013 CORPORATE RESPONSIBILITY REPORT IS AVAILABLE AT WWW.REEDELSEVIER.COM/GO/CRREPORT
29275_SAS_p041-050.indd 50
07/03/2014 10:50
Reed Elsevier Annual Reports and Financial Statements 2013
51
Financial
review
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
In this section
52 Chief Financial Officer’s report
60 Principal risks
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p051-062.indd 51
07/03/2014 10:55
52
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Chief Financial Officer’s report
Duncan Palmer
Chief Financial Officer
In 2013 we maintained the trends
in financial performance delivered
in 2012. Underlying revenue and
adjusted operating profit growth
was 3% (excluding exhibition
cycling) and 5% respectively.
Return on invested capital
improved to 12.1%. Our balance
sheet remains strong with net debt/
EBITDA of 2.1 times (on a pensions
and lease adjusted basis).
Adjusted figures
Underlying revenue growth was 2%, or 3% excluding the effects of
biennial event cycling in our exhibitions business. Reported
revenue was £6,035m (2012: £6,116m), down 1%.
RECONCILIATION OF REVENUE YEAR-ON-YEAR
YEAR TO 31 DECEMBER
2012 revenue
Underlying growth
Acquisitions
Disposals
Currency effects
2013 revenue
£m
Change
6,116
136
69
(362)
76
2%/3%*
+1%
–6%
+2%
6,035
–1%
* Excluding biennial exhibition cycling.
The overall impact of disposals in 2013 was to reduce revenues by
6%, partially offset by a 1% increase from acquisitions. There have
been disposals in each of our businesses, but the effect is most
significant in Risk Solutions, where we sold the pre-employment
screening business, in Business Information where we made a
number of disposals, and in Legal where Martindale-Hubbell, the
US legal directory business, was spun out into a joint venture.
Disposals made throughout 2013 will continue to impact reported
revenues and operating profit growth rates in 2014.
The impact of currency movements was to increase revenues by
2%, principally due to the strengthening of the US dollar, on
average, against sterling during 2013.
Underlying adjusted operating profit grew 5%. Total adjusted
operating profit was £1,749m (2012: £1,688m), up 4%.
RECONCILIATION OF ADJUSTED OPERATING PROFIT
YEAR-ON-YEAR
YEAR TO 31 DECEMBER
£m
Change
2012 adjusted operating profit
Underlying growth
Acquisitions
Disposals
Currency effects
2013 adjusted operating profit
1,688
75
11
(62)
37
1,749
+5%
–
–4%
+3%
+4%
The impact of disposals was to reduce adjusted operating profit
by 4%. Currency effects increased adjusted operating profit by 3%.
REVENUE
£m
6,055
6,002
6,116
6,035
2010
2011
2012
2013
29275_SAS_p051-062.indd 52
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
53
Reported figures
Revenue
Operating profit
Profit before tax
Net profit
Net margin
Net borrowings
Adjusted figures
Operating profit
Operating margin
Profit before tax
Net profit
Net margin
Operating cash flow
Operating cash flow conversion
Return on invested capital
2013
£m
2012**
£m
Change
Change
at constant
currencies
Change
underlying
6,035
1,376
1,196
1,110
18.4%
3,072
1,749
29.0%
1,572
1,197
19.8%
1,703
97%
12.1%
6,116
1,333
1,151
1,044
17.1%
3,127
1,688
27.6%
1,472
1,121
18.3%
1,603
95%
11.7%
–1%
+3%
+4%
+6%
+4%
+7%
+7%
+6%
–3% +2%/+3%*
+1%
+2%
+3%
+5%
+1%
+4%
+4%
+4%
* Excluding biennial exhibition cycling.
** 2012 comparative financial information has been restated following the adoption of IAS19 Employee Benefits (revised), see the accounting policies section in the combined
financial statements on page 106.
Reed Elsevier uses adjusted and underlying figures as additional performance measures. Adjusted figures primarily exclude items related to acquisitions and disposals, and
the associated deferred tax movements. Reconciliation between the reported and adjusted figures are set out in note 10 to the combined financial statements on page 120.
Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals made in both the year and prior year and assets held for
sale. Constant currency growth rates are based on 2012 full year average and hedge exchange rates.
Underlying costs were up 2%, reflecting investment in global
technology platforms and launching of new products and
services, partly offset by continued process improvements.
Actions were taken across our businesses, especially Legal, to
improve cost efficiency. Total operating costs, including the
impact of acquisitions and disposals, decreased by 3%.
The net pension expense, excluding the net pension financing
charge, was £61m (2012: £89m), including settlement and
past service credits of £59m (2012: £20m), mainly arising from
benefits changes in the US, which will reduce future costs for
our US businesses.
The overall adjusted operating margin of 29.0% was 1.4
percentage points higher than in the prior year. This included a
0.5 percentage point benefit to margin from portfolio changes as
well as a 0.3 percentage point benefit from currency effects.
Interest expense was £177m (2012: £216m). The reduction
primarily reflects the benefit of term debt refinancing at lower rates.
Adjusted profit before tax was £1,572m (2012: £1,472m), up 7%,
and up 4% at constant currencies, reflecting the increase in
adjusted operating profits and lower interest expense.
The adjusted effective tax rate on adjusted profit before tax was
23.5%, in line with the prior year. The effective tax rate excludes
movements in deferred taxation assets and liabilities related to
goodwill and acquired intangible assets, and includes the benefit
of tax amortisation where available on those items. Adjusted
operating profits and taxation are grossed up for the equity share
of taxes in joint ventures.
The application of tax law and practice is subject to some
uncertainty and amounts are provided in respect of this.
Discussions with tax authorities relating to cross border
transactions and other matters are ongoing. Although the
outcome of these discussions cannot be predicted, no significant
impact on the financial position of Reed Elsevier is expected.
The adjusted net profit attributable to shareholders of £1,197m
(2012: £1,121m) was up 7%, and up 4% at constant currencies.
ADJUSTED OPERATING PROFIT
ADJUSTED OPERATING PROFIT MARGIN
£m
1,555
1,626
1,688*
1,749
25.7%
27.1%
27.6%*
29.0%
2010
2011
2012
2013
2010
2011
2012
2013
* 2012 restated for IAS19.
* 2012 restated for IAS19.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p051-062.indd 53
07/03/2014 10:55
54
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Reported figures
Cash flows
Reported operating profit, after amortisation of acquired
intangible assets and acquisition related costs, was £1,376m
(2012: £1,333m).
The amortisation charge in respect of acquired intangible assets,
including the share of amortisation in joint ventures, amounted to
£318m (2012: £329m). Acquisition related costs were £43m (2012:
£21m), including a charge for deferred consideration payments
required to be expensed under IFRS.
The reported profit before tax was £1,196m (2012: £1,151m).
RECONCILIATION OF ADJUSTED AND REPORTED PROFIT
BEFORE TAX
YEAR TO 31 DECEMBER
Adjusted profit before tax
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Net pension financing charge
Disposals and other non-operating items
Reported profit before tax
2013
£m
1,572
(318)
(43)
(12)
(19)
16
1,196
2012
£m
1,472
(329)
(21)
(5)
(11)
45
1,151
Reported net finance costs include a charge of £19m (2012: £11m)
in respect of the defined benefit pension schemes. Net pre-tax
disposal gains were £16m (2012: £45m) arising from a gain on the
sale of Risk Solutions’ pre-employment screening business, offset
by a net loss on other disposals. These were offset by a related tax
charge of £34m (2012: £58m credit).
RECONCILIATION OF ADJUSTED AND REPORTED TAX CHARGE
YEAR TO 31 DECEMBER
Adjusted tax charge
Tax on disposals and other non-operating items
Deferred tax credits from intangible assets
Exceptional prior year tax credit
Other items
Reported tax charge
2013
£m
(370)
(34)
300
–
23
(81)
2012
£m
(346)
58
84
96
6
(102)
The reported tax charge was £81m (2012: £102m). This included
a deferred tax credit of £221m arising on the alignment of certain
business assets with their global management structure. The
reported net profit attributable to the parent companies’
shareholders was £1,110m (2012: £1,044m).
Adjusted operating cash flow was £1,703m (2012: £1,603m), up 6%
compared with the prior year and up 4% at constant currencies.
Adjusted operating cash flow conversion was 97% (2012: 95%).
CONVERSION OF ADJUSTED OPERATING PROFIT INTO CASH
YEAR TO 31 DECEMBER
Adjusted operating profit
Capital expenditure
Depreciation and amortisation of internally
developed intangible assets
Working capital and other items
Adjusted operating cash flow
Cash flow conversion
2013
£m
1,749
(308)
249
13
1,703
97%
2012
£m
1,688
(333)
227
21
1,603
95%
Capital expenditure was £308m (2012: £333m), including £251m
(2012: £263m) in respect of capitalised development costs. This
reflects sustained investment in new products and related
infrastructure, particularly in the Legal business. Depreciation and
amortisation of capitalised development costs were £249m (2012:
£227m). Capital expenditure was 5.1% of revenue (2012: £5.5%).
Depreciation and amortisation were 4.1% of revenue (2012: 3.7%).
Free cash flow – after interest and taxation – was £1,161m (2012:
£1,098m) before acquisition related spend and cash flows relating
to prior year exceptional restructuring programmes. Cash taxes
paid were £347m (2012: £281m), reflecting increased taxable
profits, predominantly in the US.
Payments made in respect of acquisition related costs amounted
to £28m (2012: £37m). Payments for exceptional restructuring
programmes from prior years were £12m (2012: £25m),
principally property costs.
Free cash flow before dividends was £1,131m (2012: £1,075m).
Ordinary dividends paid to shareholders in the year, being the 2012
final and 2013 interim dividends, amounted to £549m (2012:
£521m). Free cash flow after dividends was £582m (2012: £554m).
RETURN ON INVESTED CAPITAL
ADJUSTED OPERATING CASH FLOW CONVERSION
10.6%
11.2%
11.7%*
12.1%
98%
93%
95%*
97%
2010
2011
2012
2013
2010
2011
2012
2013
* 2012 restated for IAS19.
* 2012 restated for IAS19.
29275_SAS_p051-062.indd 54
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
55
FREE CASH FLOW
YEAR TO 31 DECEMBER
Adjusted operating cash flow
Interest paid
Tax paid
Acquisition related/restructuring costs*
Free cash flow before dividends
Ordinary dividends
Free cash flow post dividends
*Including cash tax relief.
2013
£m
1,703
(195)
(347)
(30)
1,131
(549)
582
2012
£m
1,603
(224)
(281)
(23)
1,075
(521)
554
Cash spent on acquisitions was £221m (2012: £316m), including
deferred consideration of £21m (2012: £30m) on past acquisitions.
Spend on venture capital investments was £10m (2012: £7m).
Total consideration from disposal transactions closed in 2013 was
£331m, including £6m in respect of freehold properties. The net
cash received in the calendar year from business disposals, after
timing differences and separation and transaction costs, was
£195m (2012: £160m). Net tax paid in respect of disposals was
£25m (2012: tax recovered £26m).
Share repurchases by the parent companies in 2013 were £600m
(2012: £250m), with a further £100m repurchased in 2014 as at
26 February. Proceeds from the exercise of share options were
£125m (2012: £48m).
RECONCILIATION OF NET DEBT YEAR-ON-YEAR
YEAR TO 31 DECEMBER
Net debt at 1 January
Free cash flow post dividends
Net disposal proceeds
Acquisitions
Share repurchases
Net proceeds from share options exercised
Other*
Currency translation
2013
£m
(3,127)
582
195
(231)
(600)
125
(44)
28
2012
£m
(3,433)
554
160
(323)
(250)
48
10
107
Net debt at 31 December
(3,072)
(3,127)
* Cash tax relief/payments on disposals, distributions to minorities and finance leases.
Funding
Debt
Net borrowings at 31 December 2013 were £3,072m, a decrease of
£55m since 31 December 2012. The majority of our borrowings are
denominated in US dollars and the strengthening of sterling
against the dollar since the start of the year resulted in slightly
lower net borrowings when translated at year-end rates. Excluding
currency translation effects, net borrowings decreased by £27m.
Expressed in US dollars, net borrowings at 31 December 2013 were
$5,089m, in line with the prior year.
Gross borrowings after fair value adjustments at 31 December
2013 amounted to £3,281m (2012: £3,892m). The fair value of
related derivative assets was £77m (2012: £124m). Cash balances
have been reduced to £132m (2012: £641m), increasing the
efficiency of our balance sheet.
The effective interest rate on gross borrowings was 4.8% in 2013,
down from 5.6% in the prior year. As at 31 December 2013, after
taking into account interest rate and currency derivatives, a total
of 57% of Reed Elsevier’s gross borrowings were at fixed rates with
a weighted average remaining life of 6.0 years.
The ratio of net debt to 12 months trailing EBITDA (adjusted
earnings before interest, tax, depreciation and amortisation) as at
31 December 2013 was 2.1x (31 December 2012: 2.2x) on a pensions
and lease adjusted basis. On an unadjusted basis net debt to
EBITDA was 1.6x (31 December 2012: 1.7x).
Liquidity
During July 2013, Reed Elsevier’s committed bank facility,
maturing in June 2015, was cancelled and replaced with a new
$2,000m facility, maturing in July 2018. This back-up facility
provides security of funding for short-term debt issuance and
is undrawn.
In March 2013, $309m of US dollar denominated fixed rate term
debt maturing in January 2019, with a coupon of 8.625%, was
exchanged for $389m of the 3.125% term debt due in 2022 and cash.
In June 2013, $282m of Swiss franc denominated fixed rate term
debt due in 2018 was issued at a coupon of 1.0%.
In December 2013, $461m of US term debt maturing in January
2014 was redeemed, taking advantage of the make-whole election.
Reed Elsevier has ample liquidity and access to debt capital markets,
providing the ability to repay or refinance borrowings as they mature
and to fund ongoing operational requirements.
NET DEBT
£m
TERM DEBT MATURITY PROFILE
$m
3,455
3,433
3,127
3,072
663
532
476
286
420
282
993
758
357
150
0
2010
2011
2012
2013
2014 2015 2016 2017 2018 2019 2020 2021 2022
2023
>2023
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p051-062.indd 55
07/03/2014 10:55
56
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Invested capital and returns
Elsevier Reed Finance BV
SUMMARY BALANCE SHEET
AS AT 31 DECEMBER
Goodwill and acquired intangible assets*
Internally developed intangible assets*
Property, plant and equipment*
and investments
Net assets held for sale
Net pension obligations
Working capital
Net capital employed
2013
£m
6,980
720
454
18
(379)
(1,156)
2012
£m
7,173
647
443
201
(466)
(1,139)
6,637
6,859
* Net of accumulated depreciation and amortisation.
Net capital employed was £6,637m at 31 December 2013 (2012:
£6,859m), a decrease of £222m.
The carrying value of goodwill and acquired intangible assets fell
by £193m, reflecting the annual amortisation charge, divestments
and currency effects, partly offset by acquisitions in 2013.
An amount of £133m was capitalised in the year reflecting
acquired intangible assets and £157m was recorded as goodwill.
Development costs of £251m (2012: £261m) were capitalised
within internally developed intangible assets, most notably
investment in new products and related infrastructure in the
Legal business.
Net pension obligations, i.e. pension obligations less pension
assets, decreased to £379m (31 December 2012: £466m). There
was a deficit of £219m (31 December 2012: £306m) in respect of
funded schemes, which were on average 95% funded at the end of
the year on an IFRS basis. The lower deficit reflects improvements
in assets values during 2013 and benefits changes in the US.
Negative working capital, driven by advanced receipts in our
subscription and exhibition businesses, was largely unchanged
at £1,156m.
Gross capital employed at 31 December 2013 was £11,155m
(2012: £11,338m) after adding back accumulated amortisation
and impairment of acquired intangible assets and goodwill.
The decrease of £183m principally reflects business divestments
and currency effects.
The post-tax return on average invested capital in the year was
12.1% (2012: up 0.4 percentage points as restated). This is based on
adjusted operating profits for the year, less tax at the effective
rate, and the average of the gross capital employed at the
beginning and end of the year, retranslated at the average
exchange rates, adjusted to exclude the gross up to goodwill in
respect of deferred tax liabilities established on acquisitions in
relation to intangible assets. The increase in the return reflects
the improved trading performance.
Structure
Elsevier Reed Finance BV, the Dutch parent company of the
Elsevier Reed Finance BV group (“ERF”), is directly owned by
Reed Elsevier PLC and Reed Elsevier NV. ERF provides treasury,
finance, intellectual property and reinsurance services to the
Reed Elsevier Group plc businesses through its subsidiaries in
Switzerland: Elsevier Finance SA (“EFSA”), Reed Elsevier
Properties SA (“REPSA”) and Elsevier Risks SA (“ERSA”). These
three Swiss companies are organised under one Swiss holding
company, which is in turn owned by Elsevier Reed Finance BV.
Activities
EFSA is the principal treasury centre for the Reed Elsevier
combined businesses. It is responsible for all aspects of treasury
advice and support for Reed Elsevier Group plc’s businesses
operating in Continental Europe, Latin America, the Pacific Rim,
India, China and certain other territories, and undertakes foreign
exchange and derivatives dealing services for the whole of Reed
Elsevier. EFSA also arranges or directly provides Reed Elsevier
Group plc businesses with financing for acquisitions, product
development and other general requirements and manages cash
pools, investments and debt programmes on their behalf.
REPSA actively manages intellectual property assets including
trademarks such as The Lancet and databases such as Reaxys and
PharmaPendium. ERSA is responsible for reinsurance activities
for Reed Elsevier.
Major developments
In 2013, EFSA was active in arranging the financing and foreign
currency contracts for Reed Elsevier Group plc companies related
to cross border dividends and acquisitions. EFSA issued $282m
of term debt notes in June 2013. It negotiated and advised
Reed Elsevier Group plc companies on a number of banking and
cash management arrangements in Continental Europe and
Asia and continued to advise on treasury matters, including
interest rate and foreign currency management and certain
other financial exposures.
The average balance of cash under management by EFSA in 2013,
on behalf of Reed Elsevier Group plc and its parent companies,
was approximately US$0.4bn (2012: US$0.5bn).
Liabilities and assets
At 31 December 2013, 85% (2012: 82%) of ERF’s gross assets
were held in US dollars and 10% (2012: 17%) in euros, including
US$8.2bn (2012: US$8.4bn) and €0.5bn (2012: €0.6bn) in loans
to Reed Elsevier Group plc subsidiaries. Loans made to
Reed Elsevier Group plc businesses are funded from equity,
long-term debt of US$1.9bn and short-term debt of US$0.3bn
backed by committed bank facilities. Sources of long-term
debt include Swiss domestic public bonds, euro notes, bilateral
term loans, private placements and syndicated bank facilities.
Short-term debt is primarily derived from euro and US
commercial paper programmes.
29275_SAS_p051-062.indd 56
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
57
Parent companies
Reed Elsevier PLC
Reported net profit
Adjusted net profit
Reported earnings per share
Adjusted earnings per share
Ordinary dividend per share
Reed Elsevier NV
Reported net profit
Adjusted net profit
Reported earnings per share
Adjusted earnings per share
Ordinary dividend per share
2013
£m
572
633
48.8p
54.0p
24.6p
€m
655
707
2012*
£m
538
593
44.8p
49.4p
23.0p
€m
642
689
€0.91
€0.99
€0.506
€0.87
€0.94
€0.467
Change
at constant
currencies
Change
+6%
+7%
+9%
+9%
+7%
+2%
+3%
+5%
+5%
+8%
+4%
+7%
+4%
+7%
* 2012 comparative financial information has been restated following the adoption of IAS19 Employee Benefits (revised), see the accounting policies section in each of the
parent company consolidated financial statements on page 164 and page 184.
The reported earnings per share for Reed Elsevier PLC
shareholders was 48.8p (2012: 44.8p) and for Reed Elsevier NV
shareholders was €0.91 (2012: €0.87), reflecting the improved
trading performance and deferred tax credits.
Adjusted earnings per share were up 9% at 54.0p (2012: 49.4p) and
5% at €0.99 (2012: €0.94) for Reed Elsevier PLC and Reed Elsevier
NV respectively. At constant rates of exchange, the adjusted
earnings per share of both companies increased by 7%.
The equalised final dividends proposed by the respective Boards
are 17.95p per share for Reed Elsevier PLC and €0.374 per share
for Reed Elsevier NV, 6% and 11% higher respectively against the
prior year final dividends. This gives total dividends for the year of
24.60p (2012: 23.0p) and €0.506 (2012: €0.467), up 7% and 8%
respectively. The difference in growth rates in the equalised final
dividends, and in the earlier interim dividends, reflects changes in
the euro: sterling exchange rate since the respective prior year
dividend announcement dates.
Dividend cover, based on adjusted earnings per share and the
total interim and proposed final dividends for the year, is 2.2x
(2012: 2.2x) for Reed Elsevier PLC and 2.0x (2012: 2.0x) for
Reed Elsevier NV. The dividend policy of the parent companies is,
subject to currency considerations, to grow dividends broadly in
line with adjusted earnings per share while maintaining dividend
cover (defined as the number of times the annual dividend is
covered by the adjusted earnings per share) of at least two times
over the longer term.
During 2013, 41.9m Reed Elsevier PLC shares and 25.2m Reed
Elsevier NV shares (including R shares) were repurchased. As at
31 December 2013, shares in issue for Reed Elsevier PLC and
Reed Elsevier NV respectively amounted to 1,157.4m and 709.7m.
A further 6.0m Reed Elsevier PLC shares and 3.5m Reed Elsevier
NV shares have been repurchased in January and February 2014.
ADJUSTED EARNINGS PER SHARE
DIVIDENDS
Reed Elsevier PLC
pence
Growth +9%
54.0
49.4
Reed Elsevier NV
€
Growth +5%
0.94
0.99
Reed Elsevier PLC
pence
Reed Elsevier NV
€
Growth +7%
24.6
23.0
Growth +8%
0.506
0.467
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
2012
2013
2012
2013
2012
2013
2012
2013
m
a
t
i
o
n
29275_SAS_p051-062.indd 57
07/03/2014 10:55
58
FINANCIAL REVIEW
CHIEF FINANCIAL OFFICER’S REPORT
Accounting policies
The combined financial statements are prepared in accordance
with International Financial Reporting Standards as adopted by
the European Union and as issued by the International Accounting
Standards Board following the accounting policies shown on
pages 102 to 107. The accounting policies and estimates which
require the most significant judgement relate to the valuation of
goodwill and intangible assets, the capitalisation of development
costs and taxation. Further detail is provided in the accounting
policies on pages 105 and 106.
Amendments to IAS19 – Employee Benefits
With effect from 1 January 2013, IAS19 Employee Benefits
(revised) inter alia changed the methodology used in the
calculation of the net pension financing credit or charge in relation
to defined benefit pension schemes. Under the revised standard,
pension asset returns included within the net pension financing
credit or charge are calculated by reference to the discount rate of
high-quality corporate bonds (being also the discount rate applied
in the calculation of pension obligations) and are no longer based
on the expected returns on scheme assets. The effect is to reduce
the asset returns recognised in the income statement.
Adoption of IAS19 (revised) has had no impact on Reed Elsevier’s
combined statement of financial position and statement of cash
flows. The net pension financing credit or charge is now presented
within net finance costs in Reed Elsevier’s combined income
statement, rather than within operating profit as previously
reported. Given that the revised standard may introduce greater
volatility to the income statement, the net pension financing credit
or charge has been excluded from the adjusted figures used by
Reed Elsevier as additional performance measures.
As required under the revised standard, comparative figures have
been restated. For the year ended 31 December 2012, operating
profits are £25m lower and net finance costs are £11m higher than
previously reported. On an adjusted basis, profit before tax is
£25m lower.
2014 revised methodology for allocation of
corporate and shared costs
Following a review of activities, assets and costs across the
business, Reed Elsevier will introduce a new method for the
allocation of corporate and shared costs from January 2014.
Previously unallocated items will be attributed to the business
areas, as will costs relating to shared activities and resources, on
the basis of benefits accrued. This new allocation reflects an
increased level of shared resources and capitalised costs. Had this
new method of allocation been applied during 2013, it would have
resulted in the adjusted operating profit figures shown below.
AS AT 31 DECEMBER
Adjusted operating profit
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Unallocated items
New method
2013
£m
Old method
2013
£m
787
401
106
250
210
826
414
107
238
213
(5)
(49)
1,749
1,749
Treasury policies
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
requested that Reed Elsevier Group plc and Elsevier Reed Finance
BV have due regard to the best interests of Reed Elsevier PLC and
Reed Elsevier NV shareholders in the formulation of treasury
policies. Financial instruments are used to finance the Reed
Elsevier businesses and to hedge transactions. Reed Elsevier’s
businesses do not enter into speculative transactions. The main
treasury risks faced by Reed Elsevier are liquidity risk, interest
rate risk, foreign currency risk and credit risk. The Boards of the
parent companies agree overall policy guidelines for managing
each of these risks and the Boards of Reed Elsevier Group plc and
Elsevier Finance SA agree policies (in line with parent company
guidelines) for their respective business and treasury centres.
A summary of these policies is given below.
Capital and liquidity management
The capital structure is managed to support Reed Elsevier’s
objective of maximising long-term shareholder value through
appropriate security of funding, ready access to debt and capital
markets, cost effective borrowing and flexibility to fund business
and acquisition opportunities while maintaining appropriate
leverage to ensure an efficient capital structure.
29275_SAS_p051-062.indd 58
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
59
Over the long-term, Reed Elsevier seeks to maintain cash flow
conversion of 90% or higher and credit metrics that are consistent
with a solid investment grade credit rating. The typical credit
metrics are net debt to EBITDA, on a pensions and lease adjusted
and on an unadjusted basis, and free cash flow as percentage of
net debt.
Reed Elsevier’s uses of free cash flow over the longer-term
balance the dividend policy, selective acquisitions and share
repurchases, while retaining the balance sheet strength to
maintain access to cost effective sources of borrowing.
The balance of long-term debt, short-term debt and committed
bank facilities is managed to provide security of funding, taking
into account the cash generation cycle of the business and the
uncertain size and timing of acquisition spend. Reed Elsevier
maintains a range of borrowing facilities and debt programmes
from a variety of sources to fund its requirements at short notice
and at competitive rates. Consistent with the significance of Reed
Elsevier Group plc’s US operations, the majority of debt is
denominated in US dollars. The policy is that no more than
US$1.5bn of term debt issues should mature in any 12-month
period and no more than US$3.0bn in any 36-month period. In
addition, minimum levels of borrowings with maturities over three
and five years are specified, depending on the level of net debt and
free cash flow. From time to time, Reed Elsevier may redeem term
debt early or repurchase outstanding debt in the open market
depending on market conditions.
There were no changes to Reed Elsevier’s long-term approach to
capital and liquidity management during the year.
Interest rate exposure management
Reed Elsevier’s interest rate exposure management policy aims to
reduce the exposure of the combined businesses to changes in
interest rates at efficient cost. To achieve this Reed Elsevier uses
fixed rate term debt, interest rate swaps, forward rate agreements
and interest rate options. Interest rate derivatives are used only to
hedge an underlying risk and no net market positions are held.
After taking into account interest rate and currency derivatives,
at 31 December 2013 interest expense was fixed on 57% of Reed
Elsevier’s gross borrowings which had a weighted average
remaining life of 6.0 years.
Foreign currency exposure management
Translation exposures arise on the earnings and net assets of
business operations in countries other than those of each parent
company. Some of these exposures are offset by denominating
borrowings in US dollars. Currency exposures on transactions
denominated in a foreign currency are required to be hedged using
forward contracts. In addition, recurring transactions and future
investment exposures may be hedged, in advance of becoming
contractual. The precise policy differs according to the specific
circumstances of the individual businesses. Highly predictable
future cash flows may be covered for transactions expected to
occur during the next 24 months (50 months for the Scientific,
Technical & Medical subscription businesses) within limits
defined according to the period before the transaction is expected
to become contractual. Cover takes the form of foreign exchange
forward contracts.
As at 31 December 2013, the amount of outstanding foreign
exchange cover against future transactions was £1.3bn
(2012: £1.2bn).
Credit risk
Reed Elsevier has a credit exposure for the full principal amount of
cash and cash equivalents held with individual counterparties. In
addition, it has a credit risk from the potential non-performance by
counterparties to financial instruments; this credit risk normally
being restricted to the amounts of any hedge gain and not the full
principal amount being hedged. Credit risks are controlled by
monitoring the credit quality of counterparties, principally
licensed commercial banks and investment banks with strong
long-term credit ratings, and the amounts outstanding with
each of them.
Reed Elsevier treasury policies do not allow concentrations of
risk with individual counterparties and limit significant treasury
exposures with counterparties which are rated lower than A-/A3
by Standard & Poor’s, Moody’s and Fitch. At 31 December 2013,
cash and cash equivalents totalled £132m, of which 90% was held
with banks rated A-/A3 or better.
Duncan Palmer
Chief Financial Officer
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p051-062.indd 59
07/03/2014 10:55
m
a
t
i
o
n
60
FINANCIAL REVIEW
PRINCIPAL RISKS
Principal risks
Reed Elsevier has established risk management practices that
are embedded into the operations of the businesses, based on the
framework in internal control issued by the Committee of
Sponsoring Organisations of the Treadway Commission (COSO).
The principal risks facing Reed Elsevier, which have been
considered by the Audit Committees and Boards, are described
below. It is not possible to identify every risk that could affect our
businesses, and the actions taken to mitigate the risks described
below cannot provide absolute assurance that a risk will not
materialise and/or adversely affect our business or financial
performance. Our risk management and internal control
processes are described in the Structure and Corporate
Governance section. A description of the business and a
discussion of factors affecting performance is set out in the Chief
Executive Officer’s report and Business Review. Financial risks
are discussed in the Chief Financial Officer’s report and in note 18
to the combined financial statements. Our approach to managing
environmental and other non-financial risks is set out in the
Business Review and the separate Corporate Responsibility
Report. Important specific risks identified include:
EXTERNAL RISKS
Risk
Description and impact
Mitigation
Economy and
market
conditions
Demand for our products and services may be
impacted by factors such as the economic
environment in the US, Europe and other
major economies, and government funding.
Intellectual
property rights
Data resources
Paid
subscriptions
Our products and services are largely
comprised of intellectual property content
delivered through a variety of media. We rely
on trademark, copyright, patent and other
intellectual property laws to establish and
protect our proprietary rights in these
products and services. There is a risk that our
proprietary rights could be challenged,
limited, invalidated or circumvented which
may impact demand for and pricing of our
products and services.
A number of our businesses rely extensively
upon content and data from external sources.
Data is obtained from public records,
governmental authorities, customers and
other information companies, including
competitors. The disruption or loss of data
sources, either because of changes in the law
or because data suppliers decide not to supply
them could adversely affect our products and
services.
Our scientific, technical and medical (STM)
primary publications, like those of most of our
competitors, are published largely on a paid
subscription basis. There is debate in the
government, academic and library
communities, which are the principal
customers for our STM publications,
regarding whether such publications should
be funded instead through fees charged to
authors or authors’ funders and/or made
freely available after a period following
publication. If these methods of STM
publishing are widely adopted or mandated, it
could adversely affect our revenue from paid
subscription publications.
Our businesses are focused on professional markets which have
generally been more resilient in periods of economic downturn.
We deliver information solutions, many on a subscription basis,
which are important to our customers’ effectiveness and
efficiency. We have extended our position in long-term global
growth markets through organic new launches supported by the
selective acquisition of small content and data sets. We continue to
dispose of businesses that no longer fit our strategy.
We actively engage in developing and promoting the legal
protection of intellectual property rights. Our subscription
contracts with customers contain provisions regarding the use of
proprietary content.
We are vigilant as to the use of our content and, as appropriate,
take legal action to challenge illegal distribution sources.
We seek as far as possible to have proprietary content. Where
content is supplied to us by third parties, we aim to have contracts
which provide mutual commercial benefit. We also maintain an
active dialogue with regulatory authorities on privacy and other
data related issues, and promote, with others, the responsible
use of data.
We engage extensively with stakeholders in the STM community to
better understand their needs and deliver value to them. We are
open to serving the STM community under any payment model
that can sustainably provide researchers with the critical
information tools that they need. We focus on the integrity and
quality of research through the editorial and peer review process;
we invest in efficient editorial and distribution platforms and in
innovation in platforms and tools to make content and data more
accessible and actionable; and we ensure vigilance on plagiarism
and the long-term preservation of research findings.
29275_SAS_p051-062.indd 60
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
61
STRATEGIC RISKS
Risk
Description and impact
Mitigation
Customer
acceptance of
products
Competition
Acquisitions
Reed Elsevier’s businesses are dependent on
the continued acceptance by our customers of
our products and services and the value
placed on them. Failure to meet evolving
customer needs could impact demand for our
products and consequently adversely affect
our revenue.
Our businesses operate in highly competitive
markets, which continue to evolve in response
to technological innovations, changing
legislation, regulatory changes, the entrance
of new competitors and other factors. Failure
to anticipate market trends could impact the
competitiveness of our products and services
and consequently adversely affect our
revenue.
We regularly make small acquisitions to
strengthen our portfolio. If we are unable to
generate the anticipated benefits such as
revenue growth, synergies and/or cost
savings associated with these acquisitions
this could adversely affect return on invested
capital and financial condition.
We are focused on the needs and economics of our customers and
seek to provide content and innovative solutions that help them
achieve better outcomes and enhance productivity.
We continuously invest significant resources in our products and
services, and the infrastructure to support them. We gain insights
into our markets, evolving customers’ needs, the potential
application of new technologies and business models, and the
actions of competitors. These insights inform our market
strategies and operational priorities.
Acquisitions are made within the framework of our overall
strategy, which emphasises organic development. We have a well
formulated process for reviewing and executing acquisitions and
for managing the post-acquisition integration. This process is
underpinned with clear strategic, financial and ethical criteria. We
closely monitor the integration and performance of acquisitions.
OPERATIONAL RISKS
Risk
Description and impact
Mitigation
Technology
failure
Data security
Supply chain
dependencies
Talent
Our businesses are dependent on electronic
platforms and networks, primarily the
internet, for delivery of products and
services. These could be adversely affected if
our electronic delivery platforms or networks
experience a significant failure, interruption,
or security breach.
Our businesses maintain databases and
information online, including personal
information. Breaches of our data security or
failure to comply with applicable legislation or
regulatory or contractual requirements could
damage our reputation and expose us to risk
of loss or litigation and increased regulation.
Our organisational and operational
structures are dependent on outsourced and
offshored functions. Poor performance or
failure of third parties to whom we have
outsourced activities could adversely affect
our business performance, reputation and
financial condition.
The implementation and execution of our
strategies and business plans depend on our
ability to recruit, motivate and retain
high-quality people. We compete globally and
across business sectors for talented
management and skilled individuals,
particularly those with technology and data
analytics capabilities. An inability to recruit,
motivate or retain such people could
adversely affect our business performance.
We have established procedures for the protection of our
technology assets. These include the development of business
continuity plans, including IT disaster recovery plans and back-up
delivery systems, to reduce business disruption in the event of a
major technology failure.
We have established data privacy and security programmes. We
test and re-evaluate our procedures and controls with the aim of
ensuring that personal data is protected and that we comply with
relevant legislation, regulatory and contractual requirements.
We select our vendors with care and establish contractual service
levels that we closely monitor, including through key performance
indicators and targeted supplier audits. We have developed
business continuity plans to reduce disruption in the event of a
major failure by a vendor.
We have well established management development and talent
review programmes. We monitor capability needs and
remuneration schemes are tailored to attract and motivate the
best talent available at an appropriate level of cost. We actively
seek feedback from employees, which feeds into plans to enhance
employee engagement and motivation.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p051-062.indd 61
07/03/2014 10:55
62
FINANCIAL REVIEW
PRINCIPAL RISKS
FINANCIAL RISKS
Risk
Pensions
Tax
Treasury
Description and impact
Mitigation
We have professional management of our pension
schemes and we focus on maintaining appropriate asset
allocation and plan designs. We review our funding
requirements on a regular basis with the assistance of
independent actuaries and ensure that the funding
plans are appropriate.
We have clear and consistent tax policies and tax
matters are dealt with by a professional tax function,
supported by external tax advisors. We maintain an
open dialogue with the relevant tax authorities and are
vigilant in ensuring that we comply with tax legislation.
Reed Elsevier’s approach to funding and management
of interest rate and foreign currency exposures is
described on pages 58 and 59. The approach to the
management of financial risks is described in note 18
to the combined financial statements.
We operate a number of pension schemes around the
world. Historically, the largest schemes have been local
versions of the defined benefit type in the UK, the US and
the Netherlands. The assets and obligations associated
with those pension schemes are sensitive to changes
in the market values of assets and the market related
assumptions used to value scheme liabilities. Adverse
changes to inter alia asset values, discount rates or
inflation could increase future pension costs and
funding requirements.
Our businesses operate globally and our earnings are
subject to taxation in many differing jurisdictions and at
differing rates. We seek to organise our affairs in a tax
efficient manner, taking account of the jurisdictions in
which we operate. However, tax laws that apply to Reed
Elsevier businesses may be amended by the relevant
authorities or interpreted differently, which could
adversely affect our reported results.
The Reed Elsevier combined financial statements are
expressed in pounds sterling and are subject to
movements in exchange rates on the translation of the
financial information of businesses whose operational
currencies are other than sterling. The US is our most
important market and, accordingly, significant
fluctuations in the US dollar exchange rate could
significantly affect our reported results.
Macro economic, political and market conditions may
also adversely affect the availability of short and
long-term funding, volatility of interest rates, currency
exchange rates and inflation.
REPUTATIONAL RISKS
Risk
Ethics
Environmental
Description and impact
Mitigation
As a world leading provider of professional information
solutions to the scientific, technical & medical, risk
solutions & business information, legal, and exhibitions
markets we are expected to adhere to high standards of
independence and ethical conduct. A breach of
generally accepted ethical business standards could
adversely affect our business performance, reputation
and financial condition.
The Reed Elsevier Code of Ethics and Business Conduct
is provided to every employee and is supported by
training. It encompasses such topics as fair competition,
anti-bribery and human rights and encourages open
and principled behaviour. We have well established
processes for reporting and investigating instances of
unethical conduct. Our major suppliers are required to
adopt our Supplier Code of Conduct.
Our businesses have an impact on the environment,
principally through the use of energy and water, waste
generation and, in our supply chain, through paper use
and print and production technologies. Failure to
manage our environmental impact could adversely
affect our reputation.
We are committed to reducing these environmental
impacts by limiting resource use and efficiently
employing sustainable materials and technologies.
We require our major suppliers and contractors to meet
the same objectives. We seek to ensure that all Reed
Elsevier businesses are compliant with relevant
environmental regulation.
The Strategic Report, as set out on pages 2 to 62, has been approved by the Board.
By order of the Board
Henry Udow
Company Secretary
26 February 2014
Registered Office
1-3 Strand
London
WC2N 5JR
29275_SAS_p051-062.indd 62
07/03/2014 10:55
Reed Elsevier Annual Reports and Financial Statements 2013
63
Governance
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
In this section
64 Board Directors
66 Reed Elsevier Business Leaders
68 Chairman’s introduction to
corporate governance
69 Structure and corporate governance
77 Report of the Nominations Committee
78 Directors’ Remuneration Report
95 Report of the Audit Committees
29275_SAS_p063-077.indd 63
07/03/2014 13:04
64
GOVERNANCE
BOARD DIRECTORS
Executive Directors
Non-Executive Directors
Erik Engstrom (50)
Chief Executive Officer
Anthony Habgood (67)
Chairman
R N C
Wolfhart Hauser (64)
Chairman of the Remuneration Committee
R C
Appointed: Chief Executive Officer since 2009.
Joined Reed Elsevier as Chief Executive Officer
of Elsevier in 2004.
Nationality: Swedish
Past appointments: Prior to joining Reed
Elsevier was a partner at General Atlantic
Partners. Before that was President and Chief
Operating Officer of Random House Inc and,
before its merger with Random House,
President and Chief Executive Officer of Bantam
Doubleday Dell, North America. Began his
career as a consultant with McKinsey. Served
as a Non-Executive Director of Eniro AB and
Svenska Cellulosa Aktiebolaget SCA.
Education: Holds a BSc from Stockholm School
of Economics, an MSc from the Royal Institute
of Technology in Stockholm, and gained an
MBA from Harvard Business School as a
Fulbright Scholar.
Appointed: 2009
Nationality: British
Other appointments: Chairman of Whitbread plc,
Preqin Holding Limited and Norwich Research
Partners LLP.
Past appointments: Chairman of Bunzl plc and
of Mölnlycke Health Care Limited and served as
Chief Executive of Bunzl plc, Chief Executive of
Tootal Group plc and a Director of The Boston
Consulting Group. Formerly Non-Executive
Director of Geest plc, Marks and Spencer plc,
National Westminster Bank plc, Norfolk and
Norwich University Hospitals Trust,
Powergen plc, and SVG Capital plc.
Education: Holds an MA in Economics from
Cambridge University and an MS in Industrial
Administration from Carnegie Mellon University.
He is a visiting Fellow at Oxford University.
Appointed: 2013
Nationality: German
Other appointments: Chief Executive Officer
of Intertek Group plc.
Past appointments: Chairman of
Dragenopharm GmbH & Co AG from 2002 to
2006. Prior to that he was Chief Executive Officer
of TÜV Suddeutschland between 1998 and 2002
and Chief Executive Officer of TÜV Product
Service GmbH for 10 years. Served as a
Non-Executive Director of Logica Plc and
Intertek Group plc before his current position
at the company.
Duncan Palmer (48)
Chief Financial Officer
Appointed: 2012
Nationality: British and American
Other appointments: Non-Executive Director
of Oshkosh Corporation.
Past appointments: Prior to joining Reed
Elsevier was Chief Financial Officer and Senior
Vice President of Owens Corning Inc. from 2007
having previously held various senior finance
positions within Royal Dutch Shell for 20 years
in the UK, the Netherlands and the US.
Education: Holds an MA in Mathematics from
Cambridge University and an MBA from
Stanford University, and is a UK-qualified
Chartered Management Accountant.
Marike van Lier Lels (54)
Non-Executive Director
of Reed Elsevier NV
Appointed: 2010
Nationality: Dutch
Other appointments: Member of the Supervisory
Boards of KPN NV, USG People NV, TKH Group
NV and Eneco Holding NV, and a member of the
Executive Committee of the Aegon Association.
A member of various Dutch governmental
advisory boards.
Past appointments: Member of the Supervisory
Board of Maersk BV, Executive Vice President
and Chief Operating Officer of the Schiphol
Group. Prior to joining Schiphol Group, was a
member of the Executive Board of Deutsche
Post Euro Express and held various senior
positions with Nedlloyd.
C
Robert Polet (58)
Non-Executive Director
R C
Appointed: 2007
Nationality: Dutch
Other appointments: Chairman of Safilo Group
S.p.A. and a Non-Executive Director of Philip
Morris International Inc, William Grant & Sons
Limited, Scotch and Soda NV and Crown Topco
Limited, parent company of Vertu. Member of
the Supervisory Board of Nyenrode Foundation.
Past appointments: President and Chief
Executive Officer of Gucci Group from 2004
to 2011, having previously spent 26 years at
Unilever working in a variety of marketing
and senior executive positions throughout
the world, including President of Unilever’s
Worldwide Ice Cream and Frozen Foods
division. Formerly a Non-Executive Director
of Wilderness Holdings Limited.
29275_SAS_p063-077.indd 64
10/03/2014 13:51
Reed Elsevier Annual Reports and Financial Statements 2013
65
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Adrian Hennah (56)
Non-Executive Director
A C
Lisa Hook (55)
Senior Independent Director
R N C
Appointed: 2011
Nationality: British
Other appointments: Chief Financial Officer
of Reckitt Benckiser Group plc.
Past appointments: Chief Financial Officer
of Smith & Nephew plc from 2006 to 2012. Before
that was Chief Financial Officer of Invensys plc,
having previously held various senior finance and
management positions with GlaxoSmithKline
for 18 years.
Appointed: 2006
Nationality: American
Other appointments: President and Chief
Executive Officer of Neustar Inc and a Director
of Island Press.
Past appointments: President and Chief
Executive Officer at Sun Rocket Inc. Before that
was President of AOL Broadband, Premium and
Developer Services. Prior to joining AOL, was a
founding partner at Brera Capital Partners LLC.
Previously Chief Operating Officer of Time
Warner Telecommunications and has served as
senior advisor to the Federal Communications
Commission Chairman and a senior counsel
to Viacom Cable. Formerly a Director of The
Ocean Foundation.
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Linda Sanford (61)
Non-Executive Director
A C
Ben van der Veer (62)
Chairman of the Audit Committees
Appointed: 2012
Nationality: American
Other appointments: Senior Vice President,
Enterprise Transformation, IBM Corporation.
Serves on the board of directors of The Business
Council of New York State and the Partnership
for New York City. Also serves on the board of
trustees of the State University of New York,
St John’s University, Rensselaer Polytechnic
Institute and the New York Hall of Science.
Past appointments: Non-Executive Director
of ITT Corporation until May 2013.
Appointed: 2009
Nationality: Dutch
Other appointments: Member of the Supervisory
Boards of Aegon NV, TomTom NV and Koninklijke
FrieslandCampina NV.
Past appointments: Chairman of the Executive
Board of KPMG in the Netherlands and a
member of the Management Committee of the
KPMG International board until his retirement
in 2008, having joined KPMG in 1976. Formerly a
member of the Supervisory Board of Siemens
Nederland NV.
G
o
v
e
r
n
a
n
c
e
A N C
Board Committee Membership
A Audit Committees: Reed Elsevier Group plc, Reed
Elsevier PLC and Reed Elsevier NV
R Remuneration Committee: Reed Elsevier Group plc
N Nominations Committee: joint Reed Elsevier PLC
and Reed Elsevier NV
C Corporate Governance Committee: joint Reed
Elsevier PLC and Reed Elsevier NV
Both of the Executive Directors are directors of
Reed Elsevier Group plc, Reed Elsevier PLC and
Reed Elsevier NV.
Marike van Lier Lels is a Non-Executive Director of
Reed Elsevier NV. All of the other Non-Executive
Directors are directors of Reed Elsevier Group plc,
Reed Elsevier PLC and Reed Elsevier NV.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 65
07/03/2014 13:04
m
a
t
i
o
n
66
GOVERNANCE
BUSINESS LEADERS
Reed Elsevier Business Leaders
Senior Business Executives
Mark Kelsey
Chief Executive Officer
Risk Solutions and Business
Information
Joined in 1989. Appointed CEO
Business Information in 2010 and
CEO Risk Solutions 2012.
Has held a number of senior
positions across Reed Elsevier
over the past 30 years. Studied at
Liverpool University and received
his MBA from Bradford University.
Mike Rusbridge
Chief Executive Officer
Exhibitions
Ron Mobed
Chief Executive Officer
Scientific, Technical & Medical
Mike Walsh
Chief Executive Officer
Legal
Joined in 1994. Appointed to
current position in 1996.
Joined in 2011. Appointed to
current position in 2012.
Joined in 2003. Appointed to
current position in 2011.
Previously President of Reed
Exhibitions Europe and Asia and
President Reed Exhibitions North
America. Prior to that worked with
leading US exhibition organiser,
Clapp and Poliak. Studied at
Manchester University and
Harvard Business School.
Previously President of Cengage
Learning’s Academic &
Professional Group and
Co-President and Co-Chief
Operating Officer with information
services company, IHS. Holds a
degree from Trinity College,
Cambridge and a master’s degree
from Imperial College, London.
Previously CEO of LexisNexis US
Legal Markets and Director of
Strategic Business Development
Home Depot. Prior to that was a
practising attorney at Weil, Gotshal
and Manges in Washington D.C. and
served as a consultant with The
Boston Consulting Group. Holds a
Juris Doctor degree from Harvard
Law School and is a graduate of
Yale University.
29275_SAS_p063-077.indd 66
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
67
Corporate Executives
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Ian Fraser
Human Resources Director
Kumsal Bayazit
Chief Strategy Officer
Youngsuk “YS” Chi
Director of Corporate Affairs and
Chairman Elsevier
Henry Udow
Chief Legal Officer and
Company Secretary
Joined in 2005. Appointed to
current position at that time.
Joined in 2004. Appointed to
current position in 2012.
Joined in 2005. Appointed to
current position in 2011.
Joined in 2011. Appointed to
current position at that time.
Previously Global HR Director at
BHP Billiton (1998 to 2005). Holds
an MBA in Finance and
International Business from
London’s City University and an MA
from Edinburgh University. Ian is
also a Chartered Psychologist.
Previously Executive Vice
President of Global Strategy and
Business Development for
LexisNexis Legal and Professional.
Prior to that she worked with Bain
& Company in New York, Los
Angeles, Johannesburg and
Sydney. Holds an MBA from
Harvard Business School and is a
Graduate of the University of
California at Berkeley.
Previously he was President and
Chief Operating Officer of Random
House, founding Chairman of
Random House Asia and Chief
Operating Officer for Ingram
Book Group. Holds an MBA from
Columbia University and is a
Graduate of Princeton University.
Previously Chief Legal Officer and
Company Secretary of Cadbury plc
having spent 23 years working with
the company. Prior to that he
worked at Shearman & Sterling in
New York and London. Holds a
Juris Doctor degree from the
University of Michigan Law School
and a bachelor’s degree from the
University of Rochester.
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 67
07/03/2014 13:04
m
a
t
i
o
n
68
GOVERNANCE
STRUCTURE AND CORPORATE GOVERNANCE
Chairman’s introduction to corporate governance
“ Effective boards are essential to
high standards of corporate
governance and integral to the
sustainable success of Reed
Elsevier over the long term.”
The Boards of Reed Elsevier PLC, Reed Elsevier NV and Reed
Elsevier Group plc are committed to high standards of corporate
governance and believe that such standards are integral to the
success of Reed Elsevier. The Boards have put in place policies
and procedures that promote transparency, accountability and
probity, and include the Reed Elsevier Code of Ethics and Business
Conduct which sets the standard for our corporate and individual
behaviour. The Code of Ethics and Business Conduct applies to all
Directors and employees of Reed Elsevier and more information
on its application can be found in the Corporate Responsibility
section on page 45.
As Reed Elsevier is listed in the UK, the Netherlands and the US,
it is subject to corporate governance requirements in those
jurisdictions. The following report describes Reed Elsevier’s
governance structures and procedures, and the work of the
Boards and their Committees. It is intended to provide
shareholders with a clear view of Reed Elsevier’s governance
arrangements and how Reed Elsevier has complied with the
applicable corporate governance codes of best practice during
the year. Statements with regard to compliance with corporate
governance codes and in particular the UK Corporate Governance
Code published by the Financial Reporting Council in September
2012 (the UK Code) are set out on page 69.
Reed Elsevier keeps under review developments and trends in
corporate governance. During 2013, there were a number of
changes in the Netherlands and the UK which became effective:
In January 2013, legislation to formalise the unitary board
structure in the Netherlands Civil Code was enacted. The then
Combined Board of Reed Elsevier NV resolved to establish a
unitary board and shareholders approved the necessary
changes to the articles of association at the Annual General
Meeting in April 2013. The unitary board structure was
implemented in May 2013 and further aligns the governance
structures of the two parent companies.
New principles and provisions included in the UK Code applied
to Reed Elsevier for the first time during 2013. The Boards have
applied the changes in the UK Code and these are reflected in
the Report of the Nominations Committee and the Report of the
Audit Committees. In addition, regulations introducing a new
form Strategic Report and a revised Directors’ Remuneration
Report also applied to Reed Elsevier for the first time.
The Strategic Report is set out on pages 2 to 62, and the
Directors’ Remuneration Report is set out on pages 78 to 94.
During 2013, there were a number of changes to our Boards.
Details of these are set out in the Structure and Corporate
Governance section on page 71. In September, Duncan Palmer,
Chief Financial Officer, offered his resignation from the Boards as
a result of family circumstances which unexpectedly required him
to return to the US. In January 2014, we announced that Nick Luff
would take over from Duncan at a date to be confirmed.
Biographical details for Nick can be found on page 71. We will be
asking shareholders to elect Nick as a Director, with effect from a
future date in 2014, at the forthcoming Annual General Meetings
in April and more details of this are contained in the Notices of the
2014 Annual General Meetings.
In accordance with the UK Code, we conducted, through the
Corporate Governance Committee, evaluations of the Boards,
their Committees and the performance of the individual Directors.
The outcome of these evaluations confirmed that the Boards and
the Committees continue to function effectively, and that all of
our Directors are committed to their roles. More information
regarding these evaluations is set out on page 70. All the current
Directors will stand for re-election at the Annual General
Meetings in April 2014 and their biographical details are set out
on pages 64 and 65.
Following the changes to the Boards during the year and given the
outcome of the evaluations of the Boards, their Committees and
the individual Directors, I believe that the current composition
of the Boards and their Committees continues to provide an
appropriate balance of skills, experience, independence,
knowledge and diversity to ensure that they can discharge their
duties effectively. I also believe that the corporate governance
arrangements in place are appropriate and continue to support
the growth and success of Reed Elsevier.
Anthony Habgood
Chairman
26 February 2014
Areas of significant skills and expertise of the Non-Executive Directors on the Boards
Executive board experience in a large international listed company
Knowledge of corporate governance issues for listed companies
Operational experience in Reed Elsevier’s product markets
Operational experience in Reed Elsevier’s main geographical markets
Marketing, customer relations
Operational experience with telecommunication/computer technology, electronic publishing
Management of human resources, selection and remuneration of executives
Corporate responsibility
Legal matters
Banking, tax and corporate finance
Financial and organisational audit
Corporate strategy and organisation
Percentage of the
Non-Executive Directors
63
100
38
100
88
63
100
100
88
38
75
100
29275_SAS_p063-077.indd 68
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
69
Structure and corporate governance
Corporate structure
REED ELSEVIER PLC
REED ELSEVIER NV
REED ELSEVIER GROUP PLC
Publishing and Information Businesses
ordinary share pays dividends in sterling and is subject to UK tax
law with respect to dividend and capital rights. A Reed Elsevier NV
ordinary share pays dividends in euros and is subject to Dutch tax
law with respect to dividend and capital rights. The exchange rate
used for each dividend calculation is the spot euro/sterling
exchange rate, averaged over a period of five consecutive
business days commencing on the tenth business day before
the announcement of the proposed dividend.
ELSEVIER REED FINANCE BV
Financing Activities
Corporate governance
Compliance with codes of best practice
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
implemented standards of corporate governance and disclosure
policies applicable to companies listed on the stock exchanges of
the UK, the Netherlands and the US. The effect of this is that a
standard applying to one will, where not in conflict, also be
observed by the other.
The Boards of Reed Elsevier PLC and Reed Elsevier NV support
the principles and provisions of corporate governance contained
in the UK Corporate Governance Code issued by the Financial
Reporting Council in September 2012 (the UK Code) and those
contained in the Dutch Corporate Governance Code issued in
December 2008 (the Dutch Code).
This report and the compliance statement set out below are made
in relation to the UK Code. The principles and provisions set out in
the UK Code and the Dutch Code have applied throughout the
financial year ended 31 December 2013. Reed Elsevier PLC, which
has its primary listing on the London Stock Exchange, has
complied throughout the year with the UK Code. Reed Elsevier NV,
which has its primary listing on the NYSE Euronext Amsterdam
Stock Exchange, has also complied throughout the year with the
UK Code, and subject to limited exceptions, as explained in the
Reed Elsevier NV Report of the Board on pages 179 and 180, has
applied the best practice provisions of the Dutch Code. The ways in
which Reed Elsevier PLC and Reed Elsevier NV have applied the
main principles of the UK Code are described below. For further
information on the application of the Dutch Code by Reed Elsevier
NV, see the Corporate Governance Statement of Reed Elsevier NV
published on the Reed Elsevier website, www.reedelsevier.com.
Business model
As required by Provision C.1.2 of the UK Code, pages 2 to 39
describe the business and the progress made in 2013 against Reed
Elsevier’s long-term business priorities, aimed at delivering
better outcomes for our customers and creating value for Reed
Elsevier and shareholders.
Reed Elsevier was created in January 1993, when Reed Elsevier
PLC and Reed Elsevier NV contributed their respective
businesses to two jointly owned companies, Reed Elsevier Group
plc, a UK-registered company which owns the publishing and
information businesses, and Elsevier Reed Finance BV, a
Dutch-registered company which owns the financing activities.
Reed Elsevier PLC and Reed Elsevier NV have retained their
separate legal and national identities and are publicly-held
companies. Reed Elsevier PLC’s securities are listed in London
and New York, and Reed Elsevier NV’s securities are listed in
Amsterdam and New York. Following the merger of their
respective businesses, Reed Elsevier PLC and Reed Elsevier NV
entered into a Governing Agreement to regulate their relationship,
including the economic interests of the parties and the
composition of their Boards and those of Reed Elsevier Group plc
and of Elsevier Reed Finance BV.
Equalisation arrangements
Reed Elsevier PLC and Reed Elsevier NV each hold a 50% interest
in Reed Elsevier Group plc. Reed Elsevier PLC holds a 39%
interest in Elsevier Reed Finance BV, with Reed Elsevier NV
holding a 61% interest. Reed Elsevier PLC additionally holds a
5.8% indirect equity interest in Reed Elsevier NV, reflecting the
arrangements entered into between the two companies at the
time of the merger, which determined the equalisation ratio
whereby one Reed Elsevier NV ordinary share is, in broad terms,
intended to confer equivalent economic interests to 1.538 Reed
Elsevier PLC ordinary shares. The equalisation ratio is subject to
change to reflect share splits and similar events that affect the
number of outstanding ordinary shares of either Reed Elsevier
PLC or Reed Elsevier NV.
Under the equalisation arrangements, Reed Elsevier PLC
shareholders have a 52.9% economic interest in the Reed Elsevier
combined businesses, and Reed Elsevier NV shareholders (other
than Reed Elsevier PLC) have a 47.1% economic interest in the
Reed Elsevier combined businesses. Holders of ordinary shares
in Reed Elsevier PLC and Reed Elsevier NV enjoy substantially
equivalent dividend and capital rights with respect to their
ordinary shares.
The Boards of both Reed Elsevier PLC and Reed Elsevier NV have
agreed, other than in special circumstances, to recommend
equivalent gross dividends (including, with respect to the dividend
on Reed Elsevier PLC ordinary shares, the associated UK tax
credit) based on the equalisation ratio. A Reed Elsevier PLC
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 69
07/03/2014 13:04
m
a
t
i
o
n
70
GOVERNANCE
STRUCTURE AND CORPORATE GOVERNANCE
Relations with shareholders
Reed Elsevier PLC and Reed Elsevier NV participate in regular
dialogue with institutional shareholders. Presentations on the
Reed Elsevier combined businesses are made by the Chairman,
Chief Executive Officer and Chief Financial Officer following the
announcement of the interim and full-year results and these are
simultaneously webcast. A conference call with investors was
also held following the third quarter Interim Management
Statement. In addition, two investor presentations focusing on the
LexisNexis Risk Solutions insurance business and Reed Travel
Exhibitions were held during the year. These presentations which
described the market background, business activities and growth
plans for the businesses were also made available on the Reed
Elsevier website. The Chief Executive Officer, the Chief Financial
Officer and the investor relations team meet institutional
shareholders on a regular basis and the Chairman also makes
himself available to major institutions as appropriate. A trading
update is provided ahead of the Annual General Meetings of the
two companies and towards the end of the financial year through
Interim Management Statements. The interim and annual results
announcements and presentations, together with the Interim
Management Statements, investor seminar presentations, other
important announcements and corporate governance documents
concerning Reed Elsevier, are published on the Reed Elsevier
website, www.reedelsevier.com. In accordance with the
provisions of the Dutch Code, Reed Elsevier NV has adopted a
bilateral shareholder contact policy, which is also published on
the Reed Elsevier website. The Boards of Reed Elsevier PLC and
Reed Elsevier NV commission periodic reports on the attitudes
and views of the companies’ institutional shareholders and the
results are presented to the respective Boards.
Both Reed Elsevier PLC and Reed Elsevier NV offer electronic
voting facilities in relation to proxy voting at shareholder meetings.
The Annual General Meetings provide an opportunity for the
Boards to communicate with individual shareholders. The
Chairman, the Chief Executive Officer, the Chief Financial Officer,
the chairmen of the Board Committees, other Directors and a
representative of the external auditors are available to answer
questions from shareholders.
Board induction and information
Following appointment and as required, Directors receive training
appropriate to their level of experience and knowledge. This
includes the provision of a tailored induction programme so as to
provide newly appointed Directors with information about the
Reed Elsevier businesses and other relevant information to assist
them in performing their duties. Non-Executive Directors are
encouraged to visit the Reed Elsevier businesses to meet
management and senior staff.
All Directors have full and timely access to the information
required to discharge their responsibilities fully and efficiently.
They have access to the services of the respective company
secretaries, other members of Reed Elsevier’s management and
staff, and external advisors. Directors may take independent
professional advice in the furtherance of their duties, at the
relevant company’s expense.
In addition to scheduled Board and Board Committee meetings
held during the year, the Directors attend other meetings and site
visits. Where a Director is unable to attend a Board or Board
Committee meeting he or she is provided with all relevant papers
and information relating to that meeting and is able to discuss
issues arising with the respective chairman and other Board and
Committee members.
Board evaluation
During the year, the Corporate Governance Committee, supported
by the company secretaries, assessed the performance of
individual Directors and, led by the Senior Independent Director,
also assessed the performance of the Chairman. Using
questionnaires completed by all of the Directors, the Committee
reviewed the functioning and constitution of the Boards and their
Committees, including the balance of skills, experience,
independence, knowledge of Reed Elsevier, and diversity, including
gender. The Chairman conducted interviews with each member of
the Boards to discuss individually Board effectiveness. The results
were subsequently considered in a meeting of the Boards. The
Chairman of the Boards was not present during a discussion by the
Non-Executive Directors as it related to him. Based on these
assessments, and the board effectiveness review, the Committee
believes that the performance of each Director continues to be
effective and that they demonstrate commitment to their
respective roles. The Committee also believes that the Boards and
their Committees function effectively and collaboratively and with
an appropriate level of engagement with management, and that
the diverse membership provides a broad range of skills and
perspectives. The effectiveness review confirmed that adequate
steps had been taken in response to the prior year’s
recommendations to ensure that the Boards appropriately
reviewed risk-related matters alongside strategic, financial and
operational issues. The review suggests that the Boards continue
to monitor the level of detail provided to and balance of focus by the
Boards between financial data and strategic matters. The outcome
of the last externally-facilitated evaluation process was reported
in the 2011 Annual Report and Accounts.
The Boards
The Boards of Reed Elsevier PLC, Reed Elsevier NV and Reed
Elsevier Group plc are harmonised. All of the Directors of Reed
Elsevier Group plc are also Directors of Reed Elsevier PLC and
Reed Elsevier NV. Reed Elsevier NV may nominate for appointment
to the Board up to two Non-Executive Directors who are not
appointed to the Boards of either Reed Elsevier PLC or Reed
Elsevier Group plc. Currently, one such Director, Marike van Lier
Lels, has been appointed to the Board of Reed Elsevier NV. The
names, nationalities and biographical details of each Director at
the date of this report appear on pages 64 and 65.
Following the enactment on 1 January 2013 of legislation to
formalise the unitary board governance structure in the
Netherlands Civil Code, the then Combined Board of Reed Elsevier
NV resolved to take the necessary steps to establish such a board
governance structure. Amendments to the articles of association
of Reed Elsevier NV were approved by shareholders at the Annual
General Meeting of Reed Elsevier NV in April 2013 and the unitary
Board structure was implemented in May 2013.
29275_SAS_p063-077.indd 70
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
71
There is a schedule of matters reserved to the Boards and
approved delegated authorities to the Chief Executive Officer and
other senior executives. There is a clear separation of the roles
of the Chairman and the Chief Executive Officer which are set out
in writing.
The Boards of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier
Group plc and Elsevier Reed Finance BV each comprise a balance
of Executive and Non-Executive Directors who bring a wide range
of skills and experience to the deliberations of the Boards. The
Boards of Reed Elsevier PLC and Reed Elsevier NV review the
independence of the Non-Executive Directors every year, based on
the criteria for independence set out in the UK Code. The UK Code
does not consider the Chairman to be independent due to the
unique role he has in corporate governance. Notwithstanding this,
Anthony Habgood met the independence criteria contained in the
UK Code when he was appointed Chairman in 2009. The Boards
consider all Non-Executive Directors (other than the Chairman) to
be independent of management and free from any business or
other relationship which could materially interfere with their
ability to exercise independent judgement.
The Boards of Reed Elsevier PLC and Reed Elsevier NV have
appointed Lisa Hook to act as Senior Independent Director, who is
available to meet with institutional shareholders and assist in
resolving concerns in cases where alternative channels are
deemed inappropriate. The Senior Independent Director also
leads the annual assessment of the performance of the Chairman
of Reed Elsevier PLC and Reed Elsevier NV. A profile, which
identifies the skills and experience of the Non-Executive
Directors of Reed Elsevier PLC and Reed Elsevier NV, is set
out on page 68 and is available on the Reed Elsevier website,
www.reedelsevier.com.
Reed Elsevier PLC and Reed Elsevier NV shareholders maintain
their rights to appoint individuals to the respective Boards in
accordance with the provisions of the articles of association of
these companies. Subject to this, no individual may be appointed to
the Boards of Reed Elsevier PLC, Reed Elsevier NV or Reed
Elsevier Group plc unless recommended by the joint Nominations
Committee. Members of the Committee abstain when their own
re-appointment is being considered.
As a general rule, letters of appointment in respect of
Non-Executive Directors of Reed Elsevier PLC and Reed Elsevier
NV provide that individuals will serve for an initial term of three
years, and are typically expected to serve two three-year terms,
although the Boards may invite an individual to serve for an
additional period of three years.
The respective articles of association of Reed Elsevier PLC and
Reed Elsevier NV provide that all Directors should be subject to
retirement at least every three years and are then able to make
themselves available for re-election by shareholders at
subsequent Annual General Meetings. Notwithstanding the
provisions of the articles of association, it is the Boards’ policy
to comply with the recommendations contained in the UK Code,
and all Directors will seek re-election by shareholders annually.
Board changes
Changes during the year in the composition of the Boards of Reed
Elsevier PLC, Reed Elsevier NV and Reed Elsevier Group plc are
set out in the table on page 72.
Mark Elliott and Sir David Reid retired from the Boards of Reed
Elsevier NV and Reed Elsevier PLC following the conclusion of the
Annual General Meetings in April 2013. Wolfhart Hauser was
elected to the Boards in April 2013 and succeeded Mark Elliott as
Chairman of the Remuneration Committee. Lisa Hook succeeded
Sir David Reid as the Senior Independent Director in April 2013.
In accordance with the UK Code, all Directors will retire from the
Boards of Reed Elsevier NV and Reed Elsevier PLC at the
respective Annual General Meetings and, being eligible, they will
offer themselves for re-election. Based on the assessments made
by the Corporate Governance Committee of the qualifications,
performance and effectiveness of each individual seeking
re-election, the Boards have accepted a recommendation from
the Nominations Committee that each of these Directors be
proposed for re-election at the 2014 Annual General Meeting of
the respective company.
In September 2013, Duncan Palmer gave notice of his resignation
as Chief Financial Officer effective as of 25 September 2014, or
such other earlier date as Reed Elsevier may designate.
The Nominations Committee retained an external search
consultancy to conduct a rigorous search process in conjunction
with the Boards to identify a suitable candidate to succeed Mr
Palmer. Following the conclusion of the search process and on the
recommendation of the Nominations Committee, the Boards
announced, in January 2014, the appointment of Nick Luff as Chief
Financial Officer to be effective at a date to be confirmed but is
expected to be no later than 15 December 2014.
Nick Luff has been Chief Financial Officer of Centrica plc, the UK’s
biggest consumer energy group, since 2007. Prior to that, he was
at P&O, the FTSE 100 logistics and shipping group as well as its
affiliated companies, including P&O Princess Cruises and Royal
Nedlloyd. While at P&O, he worked for 15 years in a variety of
senior finance roles, including Chief Financial Officer of the parent
company for seven years. He is a Non-Executive Director of Lloyds
Banking Group plc and a former Non-Executive Director of QinetiQ
Group plc and Royal P&O Nedlloyd NV. He has a first class degree
in mathematics from the University of Oxford and is a qualified UK
Chartered Accountant.
In accordance with the articles of association of Reed Elsevier
PLC, Directors are normally subject to election by shareholders at
the first Annual General Meeting following their appointment by
the Board. Notwithstanding the date of Nick Luff’s appointment
remains to be confirmed, shareholders will be asked to elect
Mr Luff at the Reed Elsevier Annual General Meetings in
April 2014. Subject to his election at the Annual General Meetings,
Mr Luff will be appointed to the Board of Reed Elsevier Group plc in
due course.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 71
07/03/2014 13:04
m
a
t
i
o
n
72
GOVERNANCE
STRUCTURE AND CORPORATE GOVERNANCE
BOARD ATTENDANCE
Reed Elsevier PLC
Reed Elsevier NV
Reed Elsevier Group plc
Members
Anthony Habgood (Chairman)
Mark Elliott
Erik Engstrom
Wolfhart Hauser
Adrian Hennah
Lisa Hook
Marike van Lier Lels
Duncan Palmer
Robert Polet
Sir David Reid
Linda Sanford
Ben van der Veer
Date of appointment/
(cessation)
during the year
Number of
meetings
held while
a director
Number of
meetings
attended
Number of
meetings
held while
a director
Number of
meetings
attended
Number of
meetings
held while
a director
Number of
meetings
attended
(April 2013)
April 2013
(April 2013)
6
2
6
4
6
6
n/a
6
6
2
6
6
6
1
6
3
6
6
n/a
6
5
0
6
6
6
2
6
4
6
6
6
6
6
2
6
6
6
1
6
3
6
6
6
6
5
0
6
6
7
2
7
5
7
7
n/a
7
7
2
7
7
7
1
7
4
7
7
n/a
7
6
0
6
7
Elsevier Reed Finance BV has a two-tier board structure comprising a Supervisory Board and a Management Board. The Supervisory
Board consists of Rudolf van den Brink (Chairman), Duncan Palmer, Ben van der Veer and Marike van Lier Lels, with the Management
Board consisting of Alberto Romaneschi, Gerben de Jong and Jans van der Woude. Duncan Palmer gave notice of his resignation as a
member of the Supervisory Board effective as of 25 September 2014 or such other earlier date as the Boards may designate.
Appointments to the Supervisory Board and the Management Board are made by Elsevier Reed Finance BV’s shareholders,
in accordance with the company’s articles of association.
Members
Rudolf van den Brink
Gerben de Jong
Marike van Lier Lels
Duncan Palmer
Alberto Romaneschi
Ben van der Veer
Jans van der Woude
Date of
appointment/
(cessation)
during the year
Number of
meetings
held while
a director
3
3
3
3
3
3
3
Number of
meetings
attended
2
3
2
3
3
3
3
29275_SAS_p063-077.indd 72
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
73
Board Committees
In accordance with the principles of good corporate governance, the following Committees have been established by the respective
Boards. All of the Committees have written terms of reference, which are published on the Reed Elsevier website,
www.reedelsevier.com. Membership of each Committee and attendance during the year are set out below.
Audit Committees
The Boards of Reed Elsevier PLC, Reed Elsevier NV and Reed Elsevier Group plc have established Audit Committees. The Committees
comprise only independent Non-Executive Directors. The Committees are chaired by Ben van der Veer. A report of the Audit
Committees, setting out their role and main activities during the year, appears on pages 95 and 96.
Members
Ben van der Veer (Committee Chairman)
Adrian Hennah
Sir David Reid
Linda Sanford
Date of
appointment/
(cessation)
during the year
Number of
meetings
held while a
Committee
member
Number of
meetings
attended
(April 2013)
5
5
2
5
5
3
2
5
The functions of an audit committee in respect of the financing activities are carried out by the Supervisory Board of Elsevier Reed
Finance BV.
Remuneration Committee
The Board of Reed Elsevier Group plc has established a Remuneration Committee, which is responsible for considering the
remuneration of the Executive Directors and the Chairman. The Committee comprises only Non-Executive Directors and is chaired by
Wolfhart Hauser who succeeded Mark Elliott as Chairman in April 2013. A Directors’ Remuneration Report, which has been approved by
the Boards of Reed Elsevier Group plc, Reed Elsevier PLC and Reed Elsevier NV, appears on pages 78 to 94. This report serves as
disclosure of the Directors’ Remuneration Policy and Annual Remuneration Report which contains the remuneration of the Directors
and their interests in the shares of the two parent companies, Reed Elsevier PLC and Reed Elsevier NV.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Members
Wolfhart Hauser (Committee Chairman)
Mark Elliott
Anthony Habgood
Lisa Hook
Robert Polet
Sir David Reid
Date of
appointment/
(cessation)
during the year
April 2013
(April 2013)
(April 2013)
Number of
meetings
held while a
Committee
member
Number of
meetings
attended
3
2
5
5
5
2
3
1
5
5
5
1
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 73
07/03/2014 13:04
m
a
t
i
o
n
74
GOVERNANCE
STRUCTURE AND CORPORATE GOVERNANCE
Nominations Committee
The Boards of Reed Elsevier PLC and Reed Elsevier NV have established a joint Nominations Committee. The Committee comprises only
Non-Executive Directors, and is chaired by Anthony Habgood. A report of the Nominations Committee, setting out its role and main
activities during the year, appears on page 77.
Members
Anthony Habgood (Committee Chairman)
Mark Elliott
Lisa Hook
Sir David Reid
Ben van der Veer
Corporate Governance Committee
Date of
appointment/
(cessation)
during the year
Number of
meetings
held while a
Committee
member
Number of
meetings
attended
(April 2013)
(April 2013)
5
2
5
2
5
5
1
5
1
4
The Boards of Reed Elsevier PLC and Reed Elsevier NV have established a joint Corporate Governance Committee, which is responsible
for reviewing ongoing developments and best practice in corporate governance. The Committee is also responsible for assessing the
performance of the Directors and recommending the structure and operation of the various Committees of the Boards and the
qualifications and criteria for membership of each Committee, including the independence of members of the Boards. The Committee
comprises only Non-Executive Directors, and is chaired by Anthony Habgood.
Members
Anthony Habgood (Committee Chairman)
Mark Elliott
Wolfhart Hauser
Adrian Hennah
Lisa Hook
Marike van Lier Lels
Robert Polet
Sir David Reid
Linda Sanford
Ben van der Veer
Date of
appointment/
(cessation)
during the year
Number of
meetings
held while a
Committee
member
Number of
meetings
attended
(April 2013)
April 2013
(April 2013)
5
2
3
5
5
5
5
2
5
5
5
1
2
5
5
5
5
0
4
5
29275_SAS_p063-077.indd 74
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
75
Internal control
Parent companies
The Boards of Reed Elsevier PLC and Reed Elsevier NV exercise
independent supervisory roles over the activities and systems of
internal control of Reed Elsevier Group plc and Elsevier Reed
Finance BV. The Boards of Reed Elsevier PLC and Reed Elsevier
NV have each adopted a schedule of matters which are required to
be brought to them for decision. In relation to Reed Elsevier Group
plc and Elsevier Reed Finance BV, the Boards of Reed Elsevier PLC
and Reed Elsevier NV approve the strategy and the annual
budgets, and receive regular reports on the operations, including
the treasury and risk management activities of the two
companies. Major transactions proposed by the Boards of Reed
Elsevier Group plc or Elsevier Reed Finance BV require the
approval of the Boards of both Reed Elsevier PLC and Reed
Elsevier NV.
The Reed Elsevier PLC and Reed Elsevier NV Audit Committees
meet on a regular basis to review the systems of internal control
and risk management of Reed Elsevier Group plc and Elsevier
Reed Finance BV.
Operating companies
The Board of Reed Elsevier Group plc is responsible for the system
of internal control of the Reed Elsevier publishing and information
businesses, while the Boards of Elsevier Reed Finance BV are
responsible for the system of internal control in respect of the
finance group activities. The Boards of Reed Elsevier Group plc
and Elsevier Reed Finance BV are also responsible for reviewing
the effectiveness of their systems of internal control.
The Boards of Reed Elsevier Group plc and Elsevier Reed Finance
BV have each implemented an ongoing process for identifying,
evaluating, monitoring and managing the more significant risks
faced by their respective businesses. These processes have been
in place throughout the year ended 31 December 2013 and up to
the date of the approvals of the Annual Reports and Financial
Statements 2013.
Reed Elsevier Group plc
Reed Elsevier Group plc has an established framework of
procedures and internal controls, with which the management of
each business is required to comply. Group businesses are
required to maintain systems of internal control which are
appropriate to the nature and scale of their activities and address
all significant operational and financial risks that they face. The
Board of Reed Elsevier Group plc has adopted a schedule of
matters that are required to be brought to it for decision.
Reed Elsevier Group plc has a Code of Ethics and Business
Conduct that provides a guide for achieving its business goals and
requires officers and employees to behave in an open, honest,
ethical and principled manner. The Code also outlines confidential
procedures enabling employees to report any concerns about
compliance, or about Reed Elsevier’s financial reporting
practice. The Code is published on the Reed Elsevier website,
www.reedelsevier.com.
Each division has identified and evaluated its major risks, the
controls in place to manage those risks and the levels of residual
risk accepted. Risk management and control procedures are
embedded into the operations of the business and include the
monitoring of progress in areas for improvement that come to
management and board attention. The principal risks facing
Reed Elsevier are set out on pages 60 to 62.
The major risks facing the Reed Elsevier Group plc businesses are
regularly reported to and considered by the Board and Audit
Committee. With the close involvement of business management
and the central functions, the risk management and control
procedures ensure that Reed Elsevier is managing its business
risks effectively and in a coordinated manner across the business
with clarity on the respective responsibilities and
interdependencies. Litigation and other legal regulatory matters
are managed by legal directors in Europe and the US.
The Reed Elsevier Group plc Audit Committee receives regular
reports on the identification and management of material risks
and reviews these reports. The Audit Committee also receives
regular reports from both internal and external auditors on
internal control and risk management matters. In addition, each
division is required, at the end of the financial year, to review the
effectiveness of internal controls and risk management and
report its findings on a detailed basis to the management of
Reed Elsevier Group plc. These reports are summarised and, as
part of the annual review of effectiveness, submitted to the Audit
Committee of Reed Elsevier Group plc. The Chairman of the Audit
Committee reports to the Board on any significant internal control
matters arising.
Elsevier Reed Finance BV
Elsevier Reed Finance BV has established policy guidelines, which
are applied to all Elsevier Reed Finance BV companies. The
respective Boards of Elsevier Reed Finance BV have adopted
schedules of matters that are required to be brought to them for
decision. Procedures are in place for monitoring the activities of
the finance group, including a comprehensive treasury reporting
system. The major risks affecting the finance group have been
identified and evaluated and are subject to regular review. The
controls in place to manage these risks and the level of residual
risk accepted are monitored by the Boards.
Annual review
As part of the year-end procedures, the Audit Committees and
Boards of Reed Elsevier PLC, Reed Elsevier NV, Reed Elsevier
Group plc and Elsevier Reed Finance BV review the effectiveness
of the systems of internal control and risk management during the
last financial year. The objective of these systems is to manage,
rather than eliminate, the risk of failure to achieve business
objectives. Accordingly, they can only provide reasonable, but not
absolute, assurance against material misstatement or loss. The
Boards have confirmed, subject to the above, that as regards
financial reporting risks, the respective risk management and
control systems provide reasonable assurance against material
inaccuracies or loss and have functioned properly during the year.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 75
07/03/2014 13:04
m
a
t
i
o
n
76
GOVERNANCE
STRUCTURE AND CORPORATE GOVERNANCE
Responsibilities in respect of the
financial statements
The Directors of Reed Elsevier PLC, Reed Elsevier NV, Reed
Elsevier Group plc and Elsevier Reed Finance BV are required to
prepare financial statements as at the end of each financial period,
in accordance with applicable law and regulations, which give a
true and fair view of the state of affairs, and of the profit or loss, of
the respective companies and their subsidiaries, joint ventures
and associates. They are responsible for maintaining proper
accounting records, for safeguarding assets, and for taking
reasonable steps to prevent and detect fraud and other
irregularities. The Directors are also responsible for selecting
suitable accounting policies and applying them on a consistent
basis, making judgements and estimates that are prudent
and reasonable.
Applicable accounting standards have been followed and the
Reed Elsevier combined financial statements, which are the
responsibility of the Directors of Reed Elsevier PLC and Reed
Elsevier NV, are prepared using accounting policies which comply
with International Financial Reporting Standards.
Having taken into account all the matters considered by the
Boards and brought to the attention of the Boards, the Directors
are satisfied that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the company’s
performance, business model and strategy.
Going concern
The Directors of Reed Elsevier PLC and Reed Elsevier NV, having
made appropriate enquiries, consider that adequate resources
exist for the combined businesses to continue in operational
existence for the foreseeable future and that, therefore, it is
appropriate to adopt the going concern basis in preparing the 2013
financial statements. In reaching this conclusion, the Directors of
Reed Elsevier PLC and Reed Elsevier NV have had due regard to
the combined businesses’ financial position as at 31 December
2013, the strong free cash flow of the combined businesses,
Reed Elsevier’s ability to access capital markets and the principal
risks facing Reed Elsevier.
A commentary on the Reed Elsevier combined businesses’
cash flows, financial position and liquidity for the year ended
31 December 2013 is set out in the Chief Financial Officer’s report
on pages 52 to 59. This shows that after taking account of available
cash resources and committed bank facilities that back up short-
term borrowings, none of Reed Elsevier’s borrowings fall due
within the next two years. Reed Elsevier’s policies on liquidity,
capital management and management of risks relating to interest
rate, foreign exchange and credit exposures are set out on pages
58 and 59. Further information on liquidity of the combined
businesses can be found in note 18 of the combined financial
statements. The principal risks facing Reed Elsevier are set out on
pages 60 to 62.
US certificates
As required by Section 302 of the US Sarbanes-Oxley Act 2002 and
by related rules issued by the US Securities and Exchange
Commission, the Chief Executive Officer and Chief Financial
Officer of Reed Elsevier PLC and of Reed Elsevier NV certify in the
respective Annual Reports 2013 on Form 20-F to be filed with the
Commission that they are responsible for establishing and
maintaining disclosure controls and procedures and that
they have:
designed such disclosure controls and procedures to ensure
that material information relating to Reed Elsevier is made
known to them;
evaluated the effectiveness of Reed Elsevier’s disclosure
controls and procedures;
based on their evaluation, disclosed to the Audit Committees
and the external auditors all significant deficiencies in the
design or operation of disclosure controls and procedures and
any frauds, whether or not material, that involve management
or other employees who have a significant role in Reed
Elsevier’s internal controls; and
presented in the Reed Elsevier Annual Report 2013 on Form
20-F their conclusions about the effectiveness of the disclosure
controls and procedures.
A Disclosure Committee, comprising the company secretaries of
Reed Elsevier PLC and Reed Elsevier NV and other senior Reed
Elsevier managers, provides assurance to the Chief Executive
Officer and Chief Financial Officer regarding their Section
302 certifications.
Section 404 of the US Sarbanes-Oxley Act 2002 requires the Chief
Executive Officer and Chief Financial Officer of Reed Elsevier PLC
and of Reed Elsevier NV to certify in the respective Annual Reports
2013 on Form 20-F that they are responsible for maintaining
adequate internal control structures and procedures for financial
reporting and to conduct an assessment of their effectiveness.
The conclusions of the assessment of internal control structures
and financial reporting procedures, which are unqualified, are
presented in the Reed Elsevier Annual Report 2013 on Form 20-F.
29275_SAS_p063-077.indd 76
07/03/2014 13:04
Reed Elsevier Annual Reports and Financial Statements 2013
77
Report of the Nominations Committee
This report has been prepared by the joint Nominations
Committee of Reed Elsevier PLC and Reed Elsevier NV and has
been approved by the respective Boards.
Composition of the Boards and Committees
During the year, the main areas of focus for the Committee were:
the appointment of a Non-Executive Director;
Role of the Committee
The principal role of the Committee is to provide assistance to the
Boards of Reed Elsevier PLC, Reed Elsevier NV and Reed Elsevier
Group plc by identifying individuals qualified to become Directors
and recommending to the Boards the appointment of such
individuals. The responsibilities of the Committee are set out in
written terms of reference (available at www.reedelsevier.com)
and include:
(i)
(ii)
to develop and agree the desired profile for potential
candidates for Board membership;
in consultation with external search consultants, agree
the specification for the recruitment of new directors which
provides a formal and transparent procedure for the
selection and appointment of new directors to the Boards;
(iii) to recommend to the Boards the appointment of candidates
subject, where appropriate, to the approval of shareholders
of Reed Elsevier PLC and Reed Elsevier NV;
(iv) to recommend to the Boards Directors to serve on Board
Committees, having regard to the criteria for service on
each committee as set out in the terms of reference for such
committees, and to recommend members to serve as the
Chair of those committees; and
(v)
to make recommendations to the Boards in relation to the
election or re-election of Directors at the Annual General
Meetings of Reed Elsevier PLC and Reed Elsevier NV.
Committee membership
The Committee comprises only Non-Executive Directors, and is
chaired by Anthony Habgood. The other members are Lisa Hook
and Ben van der Veer. The Committee met five times during
the year.
the appointment of a Senior Independent Director in place of
Sir David Reid who retired from the Boards in April 2013;
the appointment of a Chairman of the Remuneration
Committee in place of Mark Elliott who retired from the Boards
in April 2013;
the appointment of a Chief Financial Officer to succeed
Duncan Palmer who gave notice of his resignation in
September 2013; and
progress against Reed Elsevier’s aspirational goals regarding
the percentage of women on its Boards.
The Committee seeks to ensure that the Boards and their
Committees comprise an appropriate balance of skills,
experience, independence, knowledge of Reed Elsevier’s
businesses, and diversity, including gender and in doing so takes
into account the outcome of Board evaluations. More information
on Board evaluation can be found on page 70.
The Committee has established a formal, rigorous and
transparent procedure for the recruitment of candidates to the
Boards and recommendations by the Committee are made on the
basis of a candidate’s merit, against objective criteria and with due
regard for the benefits of diversity. The Committee retained
recruitment consultants specialising in senior and non-executive
appointments to carry out searches for a Non-Executive Director
and a new Chief Financial Officer. Spencer Stuart was retained in
connection with the search for a Non-Executive Director. Spencer
Stuart is an independent executive search consulting firm with no
other connection to Reed Elsevier. The Committee worked closely
with the consultants and following a rigorous process of
interviews and assessments, recommended to the Boards the
appointment of Wolfhart Hauser as a Non-Executive Director
and Nick Luff as Chief Financial Officer. The Boards approved
these recommendations.
In light of the retirement of Mark Elliott and Sir David Reid, the
Committee undertook a review of the roles and responsibilities of
the Non-Executive Directors. Following the review, the
Committee recommended to the Boards the appointment of Lisa
Hook as the Senior Independent Director and Wolfhart Hauser as
the Chairman of the Remuneration Committee. The Boards
approved these recommendations.
In response to the publication of the Davies Review, “Women on
Boards” in 2011, the Boards announced their aspirational goals
that by 2013 the Reed Elsevier NV Board would be comprised of
30% women and the Reed Elsevier PLC Board would be comprised
of 22% women. Following the Annual General Meetings held in
April 2013, the Boards met these goals. The Committee will
continue to monitor the composition of the Boards against their
aspirational goals while taking into account the benefits of
diversity more generally.
Details of Reed Elsevier’s approach to diversity and inclusion in
its workforce can be found in the Corporate Responsibility report
on page 46.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p063-077.indd 77
07/03/2014 13:04
m
a
t
i
o
n
78
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Directors’ Remuneration Report
The Directors’ Remuneration Report (the Report) describes
how Reed Elsevier applies the principles of good governance
relating to directors’ remuneration. This Report has been
prepared by the Remuneration Committee of Reed Elsevier
Group plc in accordance with the UK Corporate Governance
Code, the UK Listing Rules, the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 (the new UK Regulations) and the Dutch
Corporate Governance Code (the Dutch Code).
The Report was approved by the Boards of Reed Elsevier PLC,
Reed Elsevier NV and Reed Elsevier Group plc. This year,
shareholders will be invited to approve both our remuneration
policy (by way of a binding vote) and our 2013 Annual
Remuneration Report (by way of a non-binding advisory vote)
at the 2014 Annual General Meeting of Reed Elsevier PLC.
Our remuneration policy is set out on pages 79 to 85 (the Policy
Report) and the 2013 Annual Remuneration Report is set out
on pages 86 to 94.
The audited sections of the Report are clearly marked.
Introduction from Remuneration
Committee Chairman
I am pleased to present my first Report as Chairman of the Reed
Elsevier Remuneration Committee.
As you will have read elsewhere in this Annual Report, 2013 was
another year of good progress for the company. 2013 annual
incentive payments for the Executive Directors were just above
target and performance measures under the 2011-13 cycle of the
BIP (Bonus Investment Plan) and the ESOS (Executive Share
Option Scheme) will result in respective outcomes for the CEO
close to and at the full amount of the original awards. In line
with increases for the wider employee population, the
Remuneration Committee has approved a 2014 salary increase
for the CEO of 2.5%.
At the Annual General Meetings in 2013, shareholders approved
our proposed new LTIP (Long-Term Incentive Plan) and our
renewed ESOS and the first grants were made under these plans
to Executive Directors in May 2013. The Executive Directors also
participated in the 2013-15 cycle of the BIP. The 2013 awards
granted to the CFO, Duncan Palmer, under these plans lapsed on
his notice of resignation in September 2013.
For 2014 we are introducing claw-back provisions for the annual
incentive, similar to the provisions which are already in place for
our multi-year incentives.
Earlier this year, we announced the appointment of Nick Luff as
CFO. At a date to be determined later in 2014, Nick Luff will take
over from Duncan Palmer, who will leave the business when a
hand-over has been completed. The remuneration arrangements
for Nick Luff will be provided in the 2014 Notices of Annual General
Meetings which will be available on the company’s website.
Subject to shareholder approval, our remuneration policy will
apply from the conclusion of the 2014 Reed Elsevier PLC Annual
General Meeting until the Reed Elsevier PLC Annual General
Meeting in 2017. It is intended to be comprehensive, but also
sufficiently flexible to allow it to operate throughout this time
period. It is designed for a global business with two parent
companies, with listings in London, Amsterdam and New York.
The policy is based on the following principles:
Performance-related pay with demanding performance
measures linked to our strategy;
Creation of shareholder value;
Competitive remuneration to attract and retain the best
talent globally;
A balance between fixed and variable elements, and annual and
longer-term performance;
Aligning the interests of Executive Directors with shareholders
and other stakeholders;
Operating the company consistent with long-term
sustainability; and
Discouraging inappropriate risk taking.
The performance measures for the annual and multi-year
incentives are designed to drive management behaviour in a way
which supports the company’s strategy to transform the core
business through organic investment and the organic build out of
new products into adjacent markets and geographies,
supplemented by selective portfolio acquisitions and divestments.
The annual incentive is focused on operational excellence,
measured by revenue, profit and cash generation and on the
achievement of individual key performance objectives which align
with our strategic plans. The performance measures in the
multi-year incentives, which focus on return on capital, returns
to shareholders and sustained earnings growth, further support
our strategy.
This year’s Report has been prepared in a manner which balances
the specific local requirements of the new UK Regulations and the
Dutch Code with the desire to provide additional information which
may be helpful to our broader investor base.
Wolfhart Hauser
Chairman, Remuneration Committee
29275_SAS_p078-094 DIR_REMREP v25.indd 78
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
79
Remuneration Policy Report
Set out in this section is the company's remuneration policy for Directors, which, subject to shareholder approval, will apply from the
conclusion of the Reed Elsevier PLC Annual General Meeting to be held on 24 April 2014.
Remuneration policy table – Executive Directors
All footnotes to the policy table can be found on page 82.
ANNUAL BASE SALARY
Purpose and link to strategy
To recruit and retain the best executive talent globally to execute our strategic objectives at appropriate cost.
Operation
Salaries for Executive Directors are set and reviewed annually by the Remuneration Committee (the Committee) with changes
typically taking effect on 1 January. In exceptional circumstances, the Committee may review more frequently. The following factors
are considered:
The executive’s role and sustained value to the company in terms of skill, experience and overall contribution.
Competitiveness with companies which are comparable in respect of industry, size, international scope and complexity. Examples of
global peers include Thomson Reuters, WPP, Pearson, John Wiley, Wolters Kluwer, Experian, McGraw-Hill and Equifax.
The company’s guidelines for salaries for all employees for the year.
For the last two years, Executive Directors’ salary increases have been 2.5% per annum.
Maximum value
Salary increases to Executive Directors are within the range of increases for the wider employee population. However, the Committee
has discretion to exceed this to take account of individual circumstances such as change in responsibility, increases in scale or
complexity of the business, inflation or alignment to market level.
Performance framework
n/a
Recovery of sums paid
No provision.
RETIREMENT BENEFITS
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Purpose and link to strategy
Retirement plans are part of remuneration packages designed to recruit and retain the best executive talent at appropriate cost.
Operation
Our policy is to offer competitive long-term sustainable defined contribution plans. Any amount above applicable limits, for example
HMRC’s annual allowance in the UK, will be paid in cash and will be subject to tax and social security deductions. In certain
circumstances, executives can take cash instead of pension contributions.
G
o
v
e
r
n
a
n
c
e
The UK defined benefit scheme is closed to new hires. Continued membership of legacy defined benefit schemes requires annual
increases to contributions or participation fees from all members, who have a choice to switch to the defined contribution plan at any time.
The CEO is a member of a UK legacy defined benefit pension arrangement, accruing 1/30th of final year pensionable earnings (base
salary) for each year (pro-rated for part years) of service, with a normal retirement age of 60. The CEO contributes 7% of salary up to the
scheme earnings cap. In line with all UK defined benefit scheme members, the CEO’s contributions will increase to 8% from April 2014
and then by a further 1% each year to a rate of 11% in April 2017. In addition, the CEO currently pays a participation fee equal to 1% of the
amount of his base salary in excess of the scheme earnings cap. On 1 April 2014, and each April thereafter, this fee will increase by 2% of
the amount of his base salary in excess of the scheme earnings cap.
Maximum value
Defined benefit scheme – accrual of 1/30th of salary for every year of service up to a maximum of 2/3rds of salary.
Defined contribution plan – maximum company contribution of 30% of salary per annum or equivalent cash in lieu.
Performance framework
n/a
Recovery of sums paid
No provision.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p078-094 DIR_REMREP v25.indd 79
07/03/2014 11:16
m
a
t
i
o
n
80
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
OTHER BENEFITS
Purpose and link to strategy
To provide competitive benefits at appropriate cost.
Operation
Other benefits, subject to periodic review, may include private medical and dental cover, life assurance, tax return preparation costs,
car benefits, directors’ and officers’ liability insurance, relocation benefits and expatriate allowances and other benefits available to
employees generally, including, where appropriate, the tax on such benefits.
Maximum value
Over the past three years, ongoing benefits for Executive Directors (excluding relocation benefits) have amounted to between 3% and
5% of salary, in line with our policy that the maximum payable should not exceed 5% of salary. However, the Committee may provide
reasonable benefits beyond this amount in unexpected situations, such as a change in the individual’s circumstances caused by the
company, or if there is a significant increase in the cost of the benefit.
Performance framework
n/a
Recovery of sums paid
No provision.
AIP (ANNUAL INCENTIVE PLAN)
Purpose and link to strategy
Provides focus on the delivery of annual financial targets and the achievement of annual objectives and milestones which are chosen to
align with the company’s strategy and create a platform for sustainable future performance.
Why performance measures are chosen and how targets are set
Performance measures include a balanced set of financial targets and Key Performance Objectives (KPOs), which are appropriately
weighted and which support current strategy and incentivise the Executive Directors to achieve the desired outcomes without undue risk
of focusing on any one financial measure.
The targets are designed to be challenging. They are set with reference to the previous year’s performance and internal and external
forecasts for the following year.
Operation
The Committee reviews and sets the financial targets and KPOs annually, taking into account internal forecasts and strategic plans.
It approves four to six KPOs for each Executive Director, reflecting critical business priorities for which each is accountable. At least one
KPO will relate to the achievement of sustainability targets.
Following year end, the Committee compares actual performance with the financial targets and assesses the achievement of
individual KPOs.
Maximum value
The maximum potential annual incentive for Executive Directors is 150% of annual base salary.
Performance framework
The measures include financial targets, which have a weighting of at least 70%, and individual KPOs, with each element
assessed separately.
The minimum payout is zero.
If the financial measure with the lowest payout at threshold pays out at threshold and the others do not pay out at all, the overall
payout for financial measures is 5% of salary. If threshold is reached for each of the financial measures, the overall payout for the
financial measures is 26% of salary. There is no threshold level for KPOs.
Payout for target performance (financial measures and KPOs) is 100% of salary.
Following an assessment of achievement and scoring of KPOs, the Committee agrees the overall payout level for each Executive Director.
Committee discretion applies.1, 2
Recovery of sums paid
Claw-back applies.3
29275_SAS_p078-094 DIR_REMREP v25.indd 80
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
81
CURRENT MULTI-YEAR INCENTIVE PLANS
Purpose and link to strategy
The multi-year incentive plans are the main component of Executive Directors’ pay. They are designed to provide long-term incentives
for Executive Directors to achieve the key performance measures that support the company’s strategy, and to align their interests with
shareholders. The BIP encourages annual personal investment in Reed Elsevier shares.
Why performance measures are chosen and how targets are set
Our strategic focus is on transforming the core business through organic investment and the build out of new products into adjacent
markets and geographies, supplemented by selective portfolio acquisitions and divestments. The performance measures in the
multi-year incentives are chosen to support this strategy by focusing on return on capital, returns to shareholders and sustained
earnings growth.
Targets are set with regard to previous results and internal and external forecasts for the performance period. They are designed to
provide exceptional reward for exceptional performance, whilst allowing a reasonable expectation that reward at the lower end of the
scale is attainable, subject to robust performance.
BIP (BONUS INVESTMENT PLAN)
LTIP (LONG-TERM INCENTIVE PLAN)
ESOS (EXECUTIVE SHARE OPTION SCHEME)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Operation
Annually, Executive Directors may use up to
an amount equal to their AIP target for
investment in Reed Elsevier shares. In
return, they receive a matching award
which vests subject to:
performance measured over three
financial years;
continued employment; and
retention of the underlying investment
shares.
Dividend equivalents accrued during the
performance period are payable in respect
of the matching shares that vest.
Vesting may be accelerated on a change
of control.4
Maximum value
Up to 100% of the amount invested.
Performance framework
The performance measures are earnings
per share (EPS) and return on invested
capital (ROIC), weighted equally and
assessed independently, such that a payout
can be received under either one of the
measures.
The minimum payout is zero.
If one measure pays out at threshold and
the other does not pay out at all, the
overall payout is 25%. If both measures
pay out at threshold, the overall payout
is 50%.
Payout in line with expectations is 67%.
Dividend equivalents are not taken into
account in the above payout levels.
Committee discretion applies.1, 2
Annual awards of market value options
that vest, subject to performance
measured over three financial years, and
remain exercisable, subject to continued
employment, until the tenth anniversary
of grant.
Vesting may be accelerated on a change
of control.4
Annual awards of performance shares,
with vesting subject to:
performance measured over three
financial years;
continued employment; and
meeting shareholding requirements.
Executive Directors are required to retain
their net vested shares for a period of at
least six months after release.
Dividend equivalents accrued during the
performance period are payable in respect
of the performance shares that vest.
Vesting may be accelerated on a change
of control.4
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
The maximum grant in any year is up to
250% of base salary for the CEO and up
to 200% of base salary for other
Executive Directors.
The maximum grant in any year is up to
250% of base salary for the CEO and up
to 200% of base salary for other
Executive Directors.
G
o
v
e
r
n
a
n
c
e
The vesting of options is subject to EPS
measured over three years.
The minimum payout is zero.
Payout at threshold performance is
33%.
Payout in line with expectations is 80%.
Committee discretion applies.1, 2
The performance measures are relative
Total Shareholder Return (TSR), EPS and
ROIC, weighted equally and assessed
independently, such that a payout can be
received under any one of the measures
(or, for TSR, in respect of one of the three
comparator groups).
The minimum payout is zero.
If the measure with the lowest payout at
threshold pays out at threshold and the
others do not pay out at all, the overall
payout is 3%. If each of the measures
pays out at threshold, the overall payout
is 32%.
Payout in line with expectations is 50%.
Dividend equivalents are not taken into
account in the above payout levels.
Committee discretion applies.1, 2
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
Recovery of sums paid
Claw-back applies.3
Claw-back applies.3
Claw-back applies.3
29275_SAS_p078-094 DIR_REMREP v25.indd 81
07/03/2014 11:16
82
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
DISCONTINUED/ONE-OFF MULTI-YEAR INCENTIVE PLAN
REGP (REED ELSEVIER GROWTH PLAN)
Purpose and link to strategy
The REGP was introduced in 2010 during a challenging and volatile business environment following the appointment of the current CEO.
It was designed as a one-off, five-year plan for the Executive Directors instead of LTIP grants in 2010, 2011 and 2012.
Operation
The only current participant is the CEO and no further awards will be granted under this plan.
The CEO must retain a personal shareholding in the REGP of 300% of salary (in addition to shares held under the BIP) until vesting
in H1 2015.
Initial performance share awards vested, based on performance measured over 2010-2012, at 66.8%. 50% of the vested shares were
released (along with a cash dividend equivalent) and 50% were deferred and will only be released in H1 2015. The full 66.8% has been
included in the 2012 Single Total Figure on page 86. Matching awards, equal to the number of personal shares and deferred performance
shares, were granted in 2013 and vest, subject to performance, in H1 2015.
Dividend equivalents will be payable in respect of the matching awards and deferred performance shares which vest in H1 2015.
Vesting will be accelerated on a change of control.4
Maximum value
The maximum vesting over the five-year period (2010 -14) of the plan (including what has already vested after year three) is 150% of the
shares comprised in the original performance share award (of 600% of 2010 base salary).
Performance framework
Matching awards – TSR, EPS and ROIC, weighted equally and assessed independently, such that a payout can be received under any one
of the measures (or, for TSR, in respect of one of the three comparator groups). TSR is measured over the five-year period 2010-2014,
EPS is measured over the two-year period 2013-2014 and ROIC is measured at the end of 2014.
The minimum payout is zero.
If the measure with the lowest payout at threshold pays out at threshold and the others do not pay out at all, the overall payout is 3%.
If each of the measures pays out at threshold, the overall payout is 50%.
Payout in line with expectations is 50%.
Committee discretion applies.1,2
Recovery of sums paid/withholding
Claw-back applies.3
1.
Discretion in respect of annual and multi-year incentive plan payout levels: In determining the level of payout under the AIP and vesting under the multi-year incentives,
the Committee takes into account Reed Elsevier’s overall business performance and value created for shareholders over the period in review and other relevant factors. It
has discretion to adjust the vesting and payout levels if it believes this would result in a fairer outcome. This discretion will only be used in exceptional circumstances and the
Committee will explain in the next remuneration report the extent to which it has been exercised and the reasons for doing so.
2. Discretion to vary performance measures applying to existing annual and multi-year incentives: The Committee may vary the financial measures applying to a current
annual incentive year and performance measures for multi-year incentives if a change in circumstances leads it to believe that the arrangement is no longer a fair measure
of performance. Any new measures will not be materially less, or more, challenging than the original ones.
3. Application of claw-back to annual and multi-year incentives: The Committee has discretion to apply claw-back if the payout was calculated on the basis of materially
misstated financial or other data, in which case it can seek to recover the difference in value between the incorrect award and the amount that would have been paid had the
correct data been used. In respect of multi-year incentives, the Committee also has discretion to apply claw-back if a participant breaches post-termination restrictive
covenants, in which case it may require repayment of gains arising during a specified period.
4. Multi-year incentives –change of control: Under the BIP 2010, LTIP 2013 and ESOS 2013, the default position is that awards vest on a change of control on a pro-rated basis,
subject to an assessment of performance against targets at that time. Alternatively, the Committee may determine that awards will not vest and will instead be exchanged
for equivalent awards in the acquiring company. Under the REGP, awards vest within 30 days of the change of control on a pro-rated basis subject to performance.
5. Explanation of differences between the company’s policy on Directors’ remuneration and the policy for other employees: A larger percentage of Executive Directors’
remuneration is performance related than that of other employees. All managers participate in an annual incentive plan, but participation levels, measures and targets
vary according to their role and local business priorities. Approximately 100 senior executives participate in BIP and LTIP and about 1,000 in ESOS. Grant levels under all
plans vary according to role. All participants in BIP and LTIP (including the Executive Directors) are subject to the same performance measures. Under ESOS, performance
measures apply only to the Executive Directors and all other participants can choose restricted shares instead of options on the basis of a pre-determined exchange ratio.
The range and level of benefits provided vary according to role and local market practice.
29275_SAS_p078-094 DIR_REMREP v25.indd 82
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
83
Remuneration outcomes in different performance scenarios
The Committee considers the level of remuneration that may be
paid in the context of the performance delivered and value added
for shareholders. The chart is an illustration of how the CEO’s
regular annual remuneration could vary under different
performance scenarios. The salary, benefits and pension levels
are the same in all three scenarios and are based on 2014 salary,
the 2013 benefits figure from the Single Total Figure table and the
2013 pension disclosure (consistent with prior disclosure). Annual
and multi-year incentives (BIP, LTIP and ESOS) are based on the
policy table and 2014 salary. Given the one-off nature of the REGP
(see page 82 for further details), potential final payouts in H1 2015
are not reflected in this chart. The performance assumptions
which have been used are as follows: Minimum means no AIP
payout and no multi-year incentives vesting. In line with
expectations means AIP payout at 100% of salary, BIP vesting at
67% of the award, LTIP vesting at 50% of the award and ESOS
vesting at 80% of the award. Maximum means AIP payout at 150%
of salary and multi-year incentives vesting at 100% of the awards.
No share price movement is assumed and dividend equivalents
payable in respect of the BIP and LTIP are not included. For options
vesting in line with expectations, a valuation factor of 20% of the face
value of the award at grant has been applied. This is our internal
valuation assumption for options, based on the exchange ratio applied
to participants in ESOS below Board level who can choose options
or shares at a ratio of 5:1. For options vesting at maximum, a higher
valuation factor (to reflect the higher performance achievement) of
33% of the face value of the award at grant has been applied. This is in
line with the report on pay and performance published in March 2013
by the Financial Reporting Council, an independent UK regulator.
We have not included a chart for the CFO role as Duncan Palmer is
leaving the company in 2014. His salary, regular ongoing benefits
(excluding relocation expenses) and pension will continue in line with
2013 levels (see Single Total Figure table on page 86) until his
leaving date. As he is not eligible for a pro-rated AIP in respect of
CEO Remuneration (£’000)
5,325
48%
21%
31%
1,660
100%
8,090
59%
20%
21%
Multi-year incentives
(BIP, LTIP and ESOS)
Annual incentive
Salary,
benefits and
pension
Minimum
In line with
expectations
Maximum
time employed in 2014, and his BIP, LTIP and ESOS awards have
lapsed, his remuneration for 2014 is not variable according to
performance. Duncan Palmer’s successor will join the company at
a date which is still to be determined.
Approach to recruitment remuneration – Executive Directors
When agreeing the components of a remuneration package on the
appointment of a new Executive Director, or an internal promotion
to the Board, the Committee would seek to align the package with
the remuneration policy stated in the policy table. However, on an
internal promotion to the Board, any existing contractual obligations
and commitments may continue to be honoured, even if not
consistent with the prevailing policy. For example, if the individual
is a member of the legacy defined benefit pension plan, the
Committee will consider the pension arrangements in the context
of the package as a whole and may allow continued participation.
The Committee’s general principle on recruitment is to offer a
competitive remuneration package to attract high-calibre
candidates from a global talent pool. The various components and
the company’s approach are as follows:
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Standard package on recruitment*
To offer remuneration in line with the policy table (including the limits), taking into account the principles set out above.
Compensation for forfeited entitlements
The Committee may make awards and payments on hiring an external candidate to compensate him or her for entitlements forfeited on
leaving the previous employer. If such a decision is made, the Committee will attempt to reflect previous entitlements as closely as
possible using a variety of tools, including cash, share awards and options. Claw-back provisions will apply where appropriate. If
necessary to facilitate the grant of awards, the Committee may rely on the one person exemption in the UK Listing Rules.
G
o
v
e
r
n
a
n
c
e
Relocation allowances and expenses
The type and size of relocation allowances and expenses will be determined by the specific circumstances of the new recruit.
* The standard package comprises annual base salary, AIP, other benefits, annual awards under BIP, LTIP and ESOS and retirement benefits.
Shareholding requirement
The Executive Directors are subject to shareholding requirements. These are a minimum of 300% of annual base salary for the CEO and
200% of annual base salary for the CFO. On joining or promotion to the Board, Executive Directors are given a period of time to build up to
their requirement.
Policy on payments for loss of office
In line with the company’s policy, the service contracts of the existing Executive Directors contain 12-month notice periods.
The circumstances in which an Executive Director’s employment is terminated will affect the Committee’s determination of any payment
for loss of office, but it expects to apply the principles outlined in the table on the next page. The Committee reserves the right to depart
from these principles where appropriate in light of any taxation requirements to which the company or the Executive Director is subject
(including, without limitation, section 409A of the US Internal Revenue Code), or other legal obligations.
Restricted shares were granted to Duncan Palmer on his recruitment in 2012 as compensation for forfeited entitlements from his former employer.
This award has been pro-rated for service to the date of notice of resignation, with the result that 74,042 PLC ordinary shares and 51,378 NV
ordinary shares will vest on leaving. As the pro-rated shares will only be released upon his yet to be determined leaving date, rather than the
original vesting dates, a cash adjustment may be paid to him if required to ensure that the value of the pro-rated award received on leaving is
equivalent to that which would have been received under the original arrangements. Dividend equivalents on the shares will be paid on vesting.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p078-094 DIR_REMREP v25.indd 83
07/03/2014 11:16
84
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Policy on payments for loss of office (continued)
GENERAL 1
MULTI-YEAR INCENTIVES
Mutually agreed termination/termination by the company other than for cause2
The Executive Director would be entitled to salary, benefits
and other contractual payments in the normal way up to the
termination date (including any unpaid annual incentive for any
prior year) and would be paid for any accrued but untaken holiday.
Salary: Payment of up to 12 months’ salary.
Annual incentive: Any unpaid annual incentive for the previous year
and a pro-rata payment in respect of the part of the financial year
up to the termination date would generally be payable, with the
amount being determined by reference to the original
performance criteria. However, the Committee has discretion to
decide otherwise depending on the reason for termination and
other specific circumstances. The company would not pay any
annual incentive in respect of any part of the financial year
following the termination date (e.g. for any part of unserved
notice). The annual incentive claw-back provisions would apply.
Other benefits: Where possible, benefits would be continued for up
to the duration of the unserved notice period (not exceeding the
maximum stated in the policy table) or, the Executive Director
would receive a cash payment (not exceeding the cost to the
company of providing those benefits).
Pension: Deferred or immediate pension in accordance with scheme
rules, with a credit in respect of, or payment for up to, the full
period of any unworked period of notice. There is provision under
the defined benefit pension arrangements for members leaving
company service by reason of permanent incapacity to make an
application to the scheme trustee for early payment of their pension.
Other: The company may pay compensation in respect of any
statutory employment rights and may make other appropriate and
customary payments.
The company would have due regard to principles of mitigation of
loss. Reductions would be applied to reflect any portion of the
notice period that is worked and/or spent on gardening leave.
On injury, disability, ill health or death, the Committee reserves
the right to vary the treatment outlined in this section.
Employee instigated resignation
The Executive Director would not receive any payments for loss of
office. The Executive Director would be entitled to salary, benefits
and other contractual payments in the normal way up to the
termination date and would be paid for any accrued but untaken
holiday. The Executive Director will be entitled to receive an
annual incentive for a completed previous year, but not a pro-rated
annual incentive in respect of a part year up to the termination
date, unless the Committee decides otherwise in the specific
circumstances. Annual incentive claw-back provisions would
apply. A deferred or immediate pension would be payable in
accordance with the scheme rules.
Dismissal for cause
The Executive Director would not receive any payments for loss
of office. A deferred or immediate pension would be payable in
accordance with the scheme rules.
BIP 2010, LTIP 2013 and ESOS 2013: The default position is that
unvested awards will be pro-rated to reflect time employed and
will vest subject to performance measured at the end of the
relevant performance period. Options are typically exercisable
for a period of two years following vesting. In respect of the BIP,
a pro-rata number of investment shares will remain in the plan,
with the balance being released on cessation of employment.
The Committee has discretion to allow unvested awards to
vest earlier and to adjust the application of time pro-rating,
performance conditions and exercise periods subject to the
rules of the respective plans.
REGP: The default position is that unvested matching shares will
be pro-rated to reflect time employed and will vest subject to
performance measured at the end of the 2013-14 performance
period. A pro-rata number of personal shares and deferred
performance shares will remain in the plan, with the balance
being released on cessation of employment. The Committee has
discretion to allow the matching shares to vest earlier.
ESOS 2003: The default position is that options will typically
become exercisable for a six-month period (two years on
retirement) from the termination date, subject to time pro-rating
and performance conditions. The Committee may adjust the
application of time pro-rating, performance conditions and
exercise periods, subject to the rules of the plan.
All outstanding awards lapse on date of notice. Any related
personal or investment shares (e.g. under the REGP and the BIP)
will be released.
All outstanding awards lapse on date of dismissal. Any related
personal or investment shares (e.g. under the REGP and the BIP)
will be released.
1.
In addition to what is set out in the table, on termination for any reason, Erik Engstrom will be entitled to payment of amounts held in his “Retirement Account”. Before he
joined the company’s UK defined benefit arrangement, he was not a member of any company pension scheme and Reed Elsevier made annual contributions of 19.5% of base
salary to a deferred compensation plan. Contributions to this Retirement Account ceased when he became a member of the UK defined benefit arrangement.
2. As outlined in the multi-year incentives column, in cases where the approved leaver treatment applies, the multi-year incentive plans have a default position as well as
giving the Committee discretion to adjust the default treatment within certain parameters. The Committee would expect to exercise such discretion where the Committee
believes the personal circumstances of the Executive Director so require.
29275_SAS_p078-094 DIR_REMREP v25.indd 84
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
85
Non-Executive Directors
Remuneration policy table – Non-Executive Directors
FEES
Purpose and link to strategy
To enable Reed Elsevier to recruit Non-Executive Directors with the right balance of personal skills and experience to make a major
contribution to the Boards and Committees of a dual-listed global business.
Operation
Reed Elsevier Chairman: Receives an aggregate annual fee with no additional fees, e.g. Committee Chairman fees. In respect of Reed
Elsevier PLC and Reed Elsevier Group plc, the Committee determines, on the advice of the Senior Independent Director, the Chairman’s
fee. In respect of Reed Elsevier NV, the Committee makes a recommendation, on the advice of the Senior Independent Director, to the
Board of Reed Elsevier NV, which determines the Chairman’s fee.
Other Non-Executive Directors: Receive an aggregate annual fee in respect of their memberships of the Boards of Reed Elsevier plc, Reed
Elsevier NV and Reed Elsevier Group plc.* Additional fees are payable to the Senior Independent Director and Committee Chairmen.
Since 1 January 2014, fees are also payable for membership of Board Committees. In future, attendance fees may be paid. The Boards
determine the level of fees, subject to applicable law.
Fees may be reviewed annually, although in practice they have changed on a less frequent basis. When reviewing fees, consideration is
given to the time commitment required, the complexity of the role and the calibre of the individual. Comparative market data is also
reviewed, the primary source for which is the practice of FTSE 30 companies, with reference also to the NYSE Euronext Amsterdam
(AEX) index and US-listed companies.
Maximum value
The fees paid to the Chairman and the Non-Executive Directors are in respect of their memberships of the Boards of Reed Elsevier PLC,
Reed Elsevier NV and Reed Elsevier Group plc. The shareholders of Reed Elsevier PLC and Reed Elsevier Group plc have approved a
maximum annual fee limit of £500,000 and £700,000 respectively (excluding additional fees for membership of or chairing Board
Committees and assuming additional responsibilities such as acting as Senior Independent Director, all of which are not subject to a
maximum limit). The shareholders of Reed Elsevier NV have approved a maximum annual fee limit of €600,000 for the fees borne by
Reed Elsevier NV. The aggregate annual fee limit is therefore approximately £1.7m.
OTHER BENEFITS
Purpose and link to strategy
To provide customary benefits at an appropriate cost.
Operation
Other benefits for Non-Executive Directors are reviewed periodically and may include private medical cover, tax return preparation
costs, secretarial benefits and car benefits, including, where appropriate, the tax on such benefits.
Maximum value
There is no prescribed maximum amount.
* The fees paid to a Non-Executive Director who serves only on the Board of Reed Elsevier NV reflect the time commitment to that company and to other companies within the
Reed Elsevier combined businesses.
Approach to recruitment remuneration –
Non-Executive Directors
Following recruitment, a new Non-Executive Director will be
entitled to fees and other benefits in accordance with the
company’s remuneration policy. No additional remuneration is
paid on recruitment. However, any reasonable expenses incurred
during the recruitment process will be reimbursed.
Policy on payments for loss of office – Non-Executive Directors
In addition to unpaid accrued fees, the Non-Executive Directors
are entitled to receive one month’s fees for loss of office if their
appointment is terminated before the end of its term.
Service contracts and letters of appointment
There are no further obligations in the Directors’ service contracts
and letters of appointment which are not otherwise disclosed in
this Report which could give rise to a remuneration payment or
loss of office payment. All Directors’ service contracts and letters
of appointment are available for inspection at the company’s
registered office. The Executive Directors' service contracts do
not have a fixed expiry date.
Consideration of employment conditions elsewhere
in the company
When the Committee reviews the Executive Directors’ salaries
annually, it takes into account the company’s guidelines for
salaries for all employees for the forthcoming year. We do not
currently use any other remuneration comparison metrics when
determining the quantum and structure of Directors’ pay. We do
not think it is appropriate to consult with employees in connection
with our policy on Directors’ remuneration.
Consideration of shareholder views
Our practice is to consult shareholders and consider their views
when formulating, or changing, our policy. For example, in early
2013 we consulted with a number of shareholders in connection
with the proposals for a new LTIP and the renewal of the ESOS.
The feedback helped shape the design of the plans.
Prior commitments
The Committee reserves the right to make any remuneration or loss
of office payments if the terms were agreed prior to an individual
being appointed as a Director or prior to the approval of the policy.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p078-094 DIR_REMREP v25.indd 85
07/03/2014 11:16
86
GOVERNANCE
DIRECTORS' REMUNERATION REPORT
Annual Remuneration Report
Single Total Figure of Remuneration – Executive Directors (audited)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
Short-term employee benefits
Share-based awards
Pension
Total
£’000
Salary
Benefits 5
Annual
Incentive
New UK
basis 1,4,7
Dutch Civil
Code basis 2
Consistent
with prior
disclosure 3,4,7
New UK
basis 1
Dutch Civil
Code basis 2
Consistent
with prior
disclosure 3
New UK
basis1
Dutch Civil
Code basis 2
Consistent
with prior
disclosure 3
Erik
Engstrom
2013
1,077
2012
1,051
Duncan
Palmer 6
2013
2012
600
214
28
28
232
10
1,134
2,467
1,150
8,302
609
230
0
867
3,300
2,744
598
268
1,301
5,312
0
914
719
614
114
41
528
470
114
41
528
5,425
470 11,145
114
1,555
41
1,362
6,067
5,443
2,153
763
4,068
8,011
1,555
1,409
1. New UK basis (columns (d), (g) and (j)): These figures are calculated in accordance with the methodology set out in the new UK Regulations. They include, for performance
related share-based awards, the value attributable to share price appreciation since the date the award was granted. In the case of the CEO’s figures, the amount included
that relates to share price appreciation is £3m for 2012 and £1.2m for 2013.
2. Dutch Civil Code basis (columns (e), (h) and (k)): These figures comply with the requirements of the Dutch Civil Code. The figures for share-based awards comprise the
multi-year incentives charges in accordance with IFRS2 – Share-Based Payment. These IFRS2 charges do not reflect the actual value received on vesting. The figures for
pensions reflect the cost of pension provision which comprises (i) for defined benefit schemes, the transfer value of the increase in accrued pension during the year (net of
inflation, Directors’ contributions and participation fee) and (ii) for defined contribution schemes, payments made to the scheme or to the Executive Director in lieu of pension.
3. Consistent with prior disclosure (columns (f), (i) and (l)): We believe including these figures is helpful for our non-UK shareholders as the calculation methodology for
share-based awards and defined benefit pensions is consistent with what has been used in previous reports (although we have reflected amounts in the same year as
required by the New UK basis to facilitate comparison). Accordingly, values are calculated as follows: (i) for share-based awards, the value of the vested award at grant
excluding any subsequent share price movement (as shown in the share-based award tables in prior reports) and including dividend equivalents if applicable; (ii) for options,
20% of face value at grant (based on our previously disclosed 5:1 exchange ratio for options to shares applicable to ESOS participants below the Board, as described in the
2013 Notices of Annual General Meetings); (iii) for defined benefit pension, the transfer value of the increase in accrued pension during the year (net of inflation, Directors’
contributions and participation fee) and (iv) for defined contribution pension schemes, payments made to the scheme or to the Executive Director in lieu of pension.
4. Share-based awards for Erik Engstrom (columns (d) and (f)): The 2012 figures reflect the vesting of tranche 1 of the REGP and the 2010 BIP, both measured over the
2010-12 period. The vesting percentages under these plans were determined on 25 April 2013 and are in line with estimates in the 2012 Remuneration Report (pages 81 and
82). The figures include the related dividend equivalent payments paid out in cash in 2013 in respect of both plans. The 2012 REGP figures reflect the entire amount that was
performance tested over the 2010-12 period, including the 50% of shares deferred until 2015 in accordance with the plan rules. The 2013 figures represent the 2011-13 cycle
of the BIP and ESOS. As the BIP vests after the approval date of the Report, and the ESOS vests in May 2014, the average share prices for the last quarter of 2013 have been
used to arrive at an estimated figure under the New UK basis in respect of both awards. The proportion of the value of the CEO’s share-based awards under the New UK
basis that relates to share price appreciation between the dates of grant and vesting is 36% (or £3m) for 2012 and 47% (or £1.2m) for 2013 using, as required, the average
share prices for the last quarter of 2013.
5. Benefits: Each Executive Director receives a car allowance, private medical/dental insurance and the company meets the cost of tax return preparation. In 2013, Duncan
Palmer received a one-off cash relocation allowance of £500,000 which was paid to him in May 2013 in recognition of him and his family being required to relocate to the UK
from the US (see page 84 of last year’s report). As a result of his resignation, Duncan Palmer became required to repay this to the company through payroll deductions,
by deduction from his 2013 annual incentive payment, so it has not been included in column (b). He also received reimbursement of direct relocation expenses, under Reed
Elsevier’s relocation policy, amounting to £200,907, which is included.
6. Duncan Palmer’s 2012 figures: Columns (a) to (c), (g) and (i) reflect the amount Duncan Palmer received from his date of joining Reed Elsevier (24 August 2012) until the end
of the year. The 2012 share-based award figures in columns (d) and (f) relate to the restricted shares granted to compensate him for the forfeiture of awards from his former
employer (as disclosed in last year’s report), reduced to reflect time served up to the point of giving notice of resignation. The figure in column (f) includes estimated
dividend equivalents of £46,977.
7. Exchange rates used for share-based awards: The exchange rates used to convert share-based awards to pounds sterling are (i) for the New UK basis, those that applied
at the vesting dates or, if vesting has not occurred, the average exchange rates for the last quarter of 2013, (ii) for consistent with prior disclosure, those that applied at the
grant dates, (iii) for dividend equivalents, the exchange rates at the time of payment and (iv) for estimated dividend equivalents yet to be paid, the 31 December 2013 rates
disclosed under “Statement of Financial Position” in note 30 to the combined financial statements.
8. Total remuneration for Directors: This is set out in note 29 to the combined financial statements on pages 136 and 137. The table above includes remuneration for the
Executive Directors employed during 2013, whereas note 29 also includes the previous CFO, who retired at the end of 2012.
2013 Annual Incentive
Reed Elsevier continued to deliver on its long term strategic and
financial priorities in 2013. Underlying revenue growth was 2%
(3% excluding the cycling effect of biennial exhibitions), with
underlying revenue growth across all five major business areas.
Improved profitability was driven by process innovation and
portfolio development. Underlying adjusted operating profit grew
ahead of revenue at 5%. Adjusted operating cash flow was
£1,703m and the rate of conversion of adjusted operating profits
into cash flow was 97%. The post-tax return on average invested
capital increased in the year to 12.1%.
Set out below is a summary of performance against each financial
measure and the resulting annual incentive payments for 2013
(payable in March 2014):
Performance measure
Relative weighting
Achievement versus target
Payout as % of salary
Erik Engstrom
Payout as % of salary
Duncan Palmer
Revenue
Adjusted profit after
tax
Cash flow conversion
rate
Key Performance
Objectives (KPOs)
30%
30%
10%
30%
At target
Close to 30%
Close to 30%
Just above target
Just above 30%
Just above 30%
Just above target
Just above 10%
Just above 10%
CEO
Substantially all
objectives met
CFO
Most objectives met
Close to 30%
Just below 30%
105.3%
£1,134,235
101.4%
£608,550
We do not disclose our annual financial targets or details of the individual KPO targets. The Board believes that these are commercially
sensitive and that disclosing them would give competitors an unfair insight into our strategic direction and annual execution plans.
29275_SAS_p078-094 DIR_REMREP v25.indd 86
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
87
Multi-year incentives
Awards were granted to Erik Engstrom under the BIP and the ESOS in May 2011. The Committee assessed the performance measures
for these awards and the outcome is summarised below.
BIP: 2011-13 cycle performance outcome
Performance measure
Weighting
Average growth in adjusted EPS over the three-year
performance period 2
50%
ROIC in the third year
of the performance period 2
50%
Performance range
and vesting
levels set at grant 1
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
below 10.4%
10.4%
10.9%
11.4% or above
0%
50%
75%
100%
0%
50%
75%
100%
Achievement against
the performance
range
Resulting vesting
percentage
7.1% p.a.
81%
11.7%
100%
Total vesting percentage:
90.5%
1. Calculated on a straight-line basis for performance between the minimum and maximum levels.
2. The calculation methodology for EPS and ROIC is set out in the 2010 Notices of Annual General Meetings, which can be found on the company’s website.
ESOS: 2011-13 cycle performance outcome
Performance measure
Weighting
Performance range
and vesting
levels set at grant
Average growth in adjusted EPS over the three-year
performance period
100%
below 6% p.a.
6% p.a. or above
0%
100%
Achievement against
the performance
range
Resulting vesting
percentage
above 6% p.a.
100%
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Single Total Figure of Remuneration – Non-Executive Directors (audited)
Anthony Habgood
Mark Elliott (until 25 April 2013)
Wolfhart Hauser (from 25 April 2013)
Adrian Hennah
Lisa Hook2
Marike van Lier Lels3
Robert Polet
Sir David Reid (until 25 April 2013)
Linda Sanford (from 4 December 2012)
Ben van der Veer3
Total fee
Benefits1
Total
2013
2012
£550,000
£21,250
£65,058
£65,000
£80,462
£55,085
£65,000
£21,250
£65,000
£93,220
£550,000
£85,000
£65,000
£65,000
£52,846
£65,000
£85,000
£5,416
£89,431
2013
£1,900
£1,000
£500
£1,000
£500
£500
£1,000
£500
2012
£1,689
£300
£300
£300
£300
£300
£300
2013
2012
£551,900
£22,250
£65,058
£65,500
£81,462
£55,085
£65,500
£21,750
£66,000
£93,720
£551,689
£85,300
£65,300
£65,300
£52,846
£65,300
£85,300
£5,416
£89,731
G
o
v
e
r
n
a
n
c
e
1. Benefits comprise the notional benefit of tax filing support provided to Non-Executive Directors for filings outside their home country resulting from their directorships
with Reed Elsevier. The incremental assessable benefit charge per tax return has been agreed by PwC for 2013 to amount to £500. Anthony Habgood’s benefits also include
£1,400 (£1,389 in 2012) in respect of private medical insurance.
2. Lisa Hook became Senior Independent Director on 23 April 2013 and received additional fees for this role from that date.
3. The fees for Marike van Lier Lels and Ben van der Veer were paid in euros and were €65,000 and €110,000 respectively for 2013. For reporting purposes these were
converted into pounds sterling at the average exchange rate for 2013. The 2012 figures were converted into pounds sterling at the average exchange rate for 2012.
4. The total remuneration for Directors is set out in note 29 to the combined financial statements on pages 136 to 137.
2013 Non-Executive Directors’ fees
The fees in the Single Total Figure table for Non-Executive
Directors reflect the following fees in 2013 (unchanged from 2012):
Chairman
Non-Executive Directors
Senior Independent Director
Chairman of:
– Audit Committee
– Remuneration Committee
Annual fee 2013
£550,000
£65,000/€80,000
£20,000
£25,000/€30,000
£20,000
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
29275_SAS_p078-094 DIR_REMREP v25.indd 87
10/03/2014 12:52
m
a
t
i
o
n
88
GOVERNANCE
DIRECTORS' REMUNERATION REPORT
Total pension entitlements (audited)
Erik Engstrom is a member of the UK Reed Elsevier defined
benefit pension arrangements. Further details are provided in the
Policy Report on page 79 and below.
Pension – New UK Regulations
Accrued annual pension at 31
December 2012 adjusted for inflation
£184,940
Accrued annual pension
at 31 December 2013
£221,383
Single figure
pension value
£719,053
Pension – Standard information
Age at December
2013
Normal
retirement age
Director’s
contributions
Participation
fee
50
60
£9,807
£2,340
Since October 2013, the CEO pays a participation fee equal to 1% of
the amount of his base salary which exceeds the UK earnings cap.
On 1 April 2014, and each April thereafter, this fee will increase by
2% of base salary which exceeds the UK earnings cap.
Scheme interests awarded during the financial year (audited)
CURRENT MULTI-YEAR INCENTIVE PLANS
Pension – Consistent with prior disclosure
Increase in accrued pension during
the year (net of inflation)
£34,814
Transfer value1 at 31.12.13 of increase in
accrued pension during the year (net of
inflation and Directors’ contributions)
£530,417/£528,077 2
1. The transfer value represents a liability in respect of Directors’ pension
entitlements, and is not an amount paid or payable to the Director.
2. After deducting Erik Engstrom’s participation fee.
Basis on which
award is made
Face value
of award at
grant1
Value of awards if
vest in line with
expectations2
Percentage of maximum that
would be received if threshold
performance achieved 3
End of
performance
period
BIP – matching share awards
Erik Engstrom
Duncan Palmer
Opportunity to
invest cash and/or
shares up to value
of target bonus
opportunity and
receive 1 for 1
matching award
£1,050,606
£703,906
If one measure pays out at threshold,
the overall payout is 25%. If both
measures pay out at threshold,
the overall payout is 50%.
31 December
2015
£599,9844
£04
LTIP – performance share awards
Erik Engstrom
250% of salary
£2,626,557
£1,313,279
Duncan Palmer
200% of salary
£1,199,9984
£04
If the measure with the lowest payout
at threshold pays out at threshold,
the overall payout is 3%. If each
measure pays out at threshold,
the overall payout is 32%.
31 December
2015
ESOS – market value options
Erik Engstrom
250% of salary
£2,626,557
£420,249
33%
Duncan Palmer
200% of salary
£1,199,9984
£04
31 December
2015
DISCONTINUED/ONE-OFF MULTI-YEAR INCENTIVE PLAN
REGP – matching share awards
Erik Engstrom
In accordance
with the REGP
plan rules 5
£7,546,000
£3,773,000
If the measure with the lowest payout
at threshold pays out at threshold,
the overall payout is 3%. If each
measure pays out at threshold,
the overall payout is 50%.
31 December
2014
1. The face value of the LTIP and ESOS awards is calculated using the middle market quotation of PLC ordinary shares (£7.345), the closing price of NV ordinary shares
(€12.530) and the exchange rate on the day before grant (8 May 2013). These share prices are used to determine the number of awards granted, as well as to set option
exercise prices. The face value of the ESOS options shown in this column has not been reduced to reflect the fact that the aggregate option price is payable on exercise. The
face value of the BIP awards is calculated using the average price of participants’ investment shares purchased by the trustee, between 9 and 13 May 2013, the price for NV
ADRs (which is the security which the Executive Directors invested in) being $33.251. The face values for BIP, LTIP and REGP do not take into account the dividend
equivalents relating to those awards. The face value of REGP matching share awards has been determined using the applicable middle market quotations, closing prices
and exchange rates on the date of grant (25 April 2013).
2. For BIP, LTIP and ESOS, vesting in line with expectations is as per the performance scenario chart on page 83. For the REGP, it is as per the policy table on page 82.
3. Threshold payout levels for each measure have been included. Where there are multiple measures, it is possible to achieve threshold, and hence payout, in respect of just
one of the measures (or, for TSR, in respect of one of the three TSR comparator groups). A summary of the performance measures and targets for awards granted in 2013
under each of the plans is set out on page 89.
4. These awards lapsed on the date Duncan Palmer gave his notice of resignation.
5. The number of shares comprised in Erik Engstrom’s REGP matching award was determined in accordance with the plan rules and equals the number of deferred
performance shares and personal shares held in the plan at the date of the matching award grant (25 April 2013).
29275_SAS_p078-094 DIR_REMREP v25.indd 88
10/03/2014 12:53
Reed Elsevier Annual Reports and Financial Statements 2013
89
The following targets and vesting scales apply to awards granted
in 2013:
BIP: 2013-15 cycle
Match earned on personal
investment
Average growth in adjusted EPS
over the three-year
performance period*
0%
50%
75%
100%
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
ROIC in the third
year of the
performance
period*
below 11.2%
11.2%
11.7%
12.2% or above
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the three-year
performance period
0%
33%
52.5%
65%
75%
85%
92.5%
100%
below 5% p.a.
5% p.a.
6% p.a.
7% p.a.
8% p.a.
9% p.a.
10% p.a.
11% p.a. or above
ROIC in the third
year of the
performance
period
below 11.2%
11.2%
11.45%
11.7%
11.95%
12.2%
12.45%
12.7% or above
* EPS and ROIC have equal weighting and straight-line vesting applies to
performance between the points.
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth/ROIC percentages.
LTIP: 2013-15 cycle
Vesting is dependent on three separate performance measures of
equal weighting: a TSR measure, an EPS measure and a ROIC
measure.1
Vesting percentage of each third of
the TSR tranche2
TSR ranking within the relevant TSR
comparator group
0%
30%
100%
Below median
Median
Upper quartile
ESOS: 2013-2015 cycle
Proportion of the award vesting
Average growth in adjusted EPS over the
three-year performance period*
0%
33%
80%
100%
below 4% p.a.
4% p.a.
6% p.a.
8% p.a. or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth percentages.
1. The calculation methodology for TSR, EPS and ROIC, and the components of the
TSR comparator groups, are set out in the 2013 Notices of Annual General
Meetings, which can be found on the company’s website.
2. Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
REGP: matching awards
As disclosed in previous reports, vesting is dependent on three
separate performance measures of equal weighting: a TSR
measure, an EPS measure and a ROIC measure.
The three TSR comparator groups (Sterling, Euro and US Dollar)
reflect the fact that Reed Elsevier accesses equity capital markets
through three exchanges – London, Amsterdam and New York –
in three currency zones. Reed Elsevier’s TSR performance is
measured separately against each comparator group and each
ranking achieved will produce a payout, if any, in respect of
one-third of the TSR measure. The proportion of the TSR measure
that vests will be the sum of the three payouts.
Each comparator group comprises approximately 40 companies,
selected on the following basis for the 2013-15 LTIP cycle:
(a) they were in a relevant market index or are the largest listed
companies on the relevant exchanges at the end of the year
before the start of the performance period: the FTSE 100 for
the Sterling group; AEX, NYSE Euronext and the Frankfurt
Stock Exchange for the Euro group; and the S&P 500 for the
US Dollar group;
(b) certain companies were then excluded:
those with mainly domestic revenues (as they do not reflect
the global nature of Reed Elsevier’s customer base);
those engaged in extractive industries (as they are exposed
to commodity cycles); and
financial services companies (as they have a different risk/
reward profile);
(c) the remaining companies were then ranked by market
capitalisation and, for each comparator group, the 20
companies above and below Reed Elsevier were taken;
Vesting percentage of each third of
the TSR tranche*
TSR ranking within the relevant TSR
comparator group
0%
30%
100%
Below median
Median
Upper quartile
* Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the two-year
performance period*
0%
60%
100%
below 7% p.a.
7% p.a.
13% p.a. or above
ROIC in the second
year of the
performance
period*
below 10.7%
10.7%
12.7% or above
* Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
External appointments
The Committee believes that the experience gained by allowing
Executive Directors to serve as Non-Executive Directors on the boards
of other organisations is of benefit to Reed Elsevier. Accordingly,
Executive Directors may, subject to the approval of the Chairman
and the CEO (or the Chairman only in the case of the CEO), serve as
Non-Executive Directors on the boards of up to two non-associated
companies (of which only one may be a major company) and they
may retain remuneration arising from such appointments.
(d) relevant listed global peers operating in businesses similar to
those of Reed Elsevier but not otherwise included were added.
Duncan Palmer is a Non-Executive Director of Oshkosh
Corporation and received fees of £63,141 for 2013.
Payments to past Directors and payments for loss of office
(audited)
There have been no payments to past Directors or payments for
loss of office in 2013.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p078-094 DIR_REMREP v25.indd 89
10/03/2014 12:55
90
GOVERNANCE
DIRECTORS' REMUNERATION REPORT
Statement of Directors’ shareholdings and other share
interests (audited)
Shareholding requirement
The Committee believes that a closer alignment of interests can
be created between senior management and shareholders if
executives build and maintain a significant personal stake in Reed
Elsevier. The shareholding requirements applicable to the Executive
Directors are set out in the table below. Shares that count for this
purpose are any type of Reed Elsevier security owned outright by
the individual and their spouse, civil partner or dependent child.
Meeting the shareholding requirement is both a vesting condition
for awards granted and a requirement to maintain eligibility for
future awards. Shareholding requirements fall away on leaving
the company.
On 31 December 2013, the Executive Directors’ shareholdings
were as follows (valued using the middle market closing prices of
Reed Elsevier securities):
Shareholding
requirement (% of
31 December 2013
annual base salary)
Actual shareholding as
at 31 December 2013
(% of 31 December 2013
annual base salary)
Erik Engstrom
Duncan Palmer*
300%
200%
734%
69%
* Duncan Palmer had been given until 31 December 2015 to build up to his required
level of shareholding, which meant retaining net shares earned from incentive
plans until he reached this level. On resignation, he forfeited his regular annual
multi-year incentive awards and will not fulfil the requirement, which will cease to
apply on leaving.
Share interests
Erik Engstrom
Anthony Habgood
Wolfhart Hauser*
Adrian Hennah
Lisa Hook
Marike van Lier Lels
Duncan Palmer
Robert Polet
Linda Sanford
Ben van der Veer
Reed Elsevier PLC
ordinary shares
Reed Elsevier NV
ordinary shares
1 January
2013
31 December
2013
1 January
2013
31 December
2013
107,040
50,000
114,552 509,556
25,000
50,000
513,765
25,000
750
5,163
5,163
1,000
88
1,000
3,600
4,800
4,800
30,022
5,000
5,000
* Wolfhart Hauser was appointed on 25 April 2013.
There have been no changes in these share interests at the date of this Report.
Multi-year incentive interests (audited)
All outstanding unvested options and share awards in the tables
below and on page 91 are subject to performance conditions,
except for the deferred 50% of Erik Engstrom’s already
performance-tested 2010 REGP performance share award (see
page 82) and the RSP award granted to Duncan Palmer on joining
Reed Elsevier (see page 83). For disclosure purposes, any PLC and
NV ADRs awarded under the BIP or the REGP have been converted
into ordinary share equivalents. Between 31 December 2013 and
the date of this Report, there have been no changes in the options
or share awards held by Executive Directors.
Erik Engstrom
OPTIONS
Year of
grant
Type of
security
No. of
options
held on
1 Jan
2013
No. of
options
granted
during
2013
No. of
options
exercised
during
2013
Market
price per
share at
exercise
No. of
options
held on
31 Dec
2013
Option
price
Unvested
options
vesting on
Options
exercisable
until
ESOS
2004
PLC ord
63,460
£4.780
63,460
£ 7.531
NV ord
43,866
€10.300
43,866
€12.810
2005
PLC ord
154,517
£5.335
154,517
£ 8.774
NV ord
105,412
€11.310
105,412
€15.277
2006
PLC ord
178,895
NV ord
120,198
2011
PLC ord
139,146
NV ord
92,953
2012
PLC ord
198,836
NV ord
139,742
2013
PLC ord
178,799
£5.305
€11.470
£5.390
€8.969
£5.155
€9.030
£7.345
124,337
€12.530
178,895
120,198
139,146
05 May 14
92,953
05 May 14
198,836
02 May 15
139,742
02 May 15
178,799
09 May 16
124,337
09 May 16
13 May 16
13 May 16
05 May 21
05 May 21
02 May 22
02 May 22
09 May 23
09 May 23
LTIP
2004
NV ord
PLC ord
NV ord
325,163
224,766
Total PLC ords
Total NV ords
1,060,017
726,937
178,799
124,337
£4.780
€10.300
325,163
224,766
543,140
374,044
£7.531
€12.810
695,676
477,230
29275_SAS_p078-094 DIR_REMREP v25.indd 90
10/03/2014 12:56
Reed Elsevier Annual Reports and Financial Statements 2013
91
Date of release
H1 2013
H1 2014
H1 2015
H1 2016
H1 2016
H1 2016
50% H1 2013
50% H1 2015
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Erik Engstrom (continued)
SHARES
BIP
No. of
unvested
shares
held on
1 Jan 2013
140,378
122,352
136,950
Year of
grant
Type of
security
2010
20111
2012
2013
NV ord
NV ord
NV ord
NV ord
LTIP
2013 PLC ord
NV ord
No. of
shares
awarded
during
2013
Market
price
per share
at award
No. of shares
vested/
performance
tested during
2013
Market
price per share
at vesting/
performance
testing
No. of
unvested/non-
performance
tested shares
held on
31 Dec 2013
€8.310
125,638
€13.100
End of
performance
period
Dec 2012
€8.969
€9.030
96,830
€12.530
178,799
£7.345
124,337
€12.530
122,352
Dec 2013
136,950
Dec 2014
96,830
Dec 2015
178,799
Dec 2015
124,337
Dec 2015
Dec 2012
REGP
2010 PLC ord
643,086
£4.665
429,7102
£7.774
NV ord
422,310
€8.310
282,1872
€13.100
Dec 2012
50% H1 2013
2013 PLC ord
NV ord
Total PLC ords
Total NV ords
643,086
821,990
£7.760
€13.150
321,895
450,494
500,694
671,661
429,710
407,825
321,895
450,494
500,694
930,963
Dec 2014
Dec 2014
50% H1 2015
H1 2015
H1 2015
1. The performance outcome for the BIP 2011 is set out on page 87.
2. The number of shares shown represents the entire amount which was performance tested in H1 2013. 50% of this has been deferred and is subject to release in H1 2015.
Duncan Palmer
OPTIONS
Year of
grant
Type of
security
ESOS
2012
PLC ord
2013
NV ord
PLC ord
NV ord
Total PLC ords
Total NV ords
SHARES
Year of
grant
Type of
security
BIP
PSP
LTIP
2013
2012
2013
RSP*
2012
NV ord
PLC ord
PLC ord
NV ord
PLC ord
NV ord
No. of
options
held on
1 Jan
2013
67,331
48,018
67,331
48,018
No. of
unvested
shares
held on
1 Jan 2013
179,551
No. of
options
granted
during
2013
81,688
56,806
81,688
56,806
Option
price
£6.015
€10.560
£7.345
€12.530
No. of
shares
awarded
during 2013
Market price
per share at
award
55,298
€12.530
81,688
£6.015
£7.345
56,806
€12.530
249,376
£6.015
Total PLC ords
Total NV ords
428,927
81,688
112,104
No. of
options
exercised
during
2013
Market
price per
share at
exercise
No. of
options
held on
31 Dec
2013
lapsed
lapsed
lapsed
lapsed
Unvested
options
vesting on
Options
exercisable
until
G
o
v
e
r
n
a
n
c
e
No. of shares
vested/
performance
tested during
2013
Market price
per share at
vesting/
performance
testing
No. of
unvested/non-
performance
tested shares
held on
31 Dec 2013
End of
performance
period
Date of
release
lapsed
lapsed
lapsed
lapsed
72,042
51,378
72,042
51,378
Termination
date
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
* Duncan Palmer's RSP award has been subject to time pro-rating following his resignation. The number of unvested shares held on 31 December 2013 is the number that will
vest on termination. In accordance with the terms of the award, half of it is being settled with Reed Elsevier NV ordinary shares.
29275_SAS_p078-094 DIR_REMREP v25.indd 91
07/03/2014 11:16
m
a
t
i
o
n
92
GOVERNANCE
DIRECTORS' REMUNERATION REPORT
Performance graphs and CEO historic pay table
The graphs below show total shareholder returns for Reed Elsevier PLC and Reed Elsevier NV, calculated on the basis of the average
share price in the 30 trading days before the respective year end and assuming dividends were reinvested. Reed Elsevier PLC’s
performance is compared with the FTSE 100 and Reed Elsevier NV with the AEX Index (to reflect their respective memberships of those
indices), over the five years from 31 December 2008 to 31 December 2013. Charts showing performance over a four-year period are
included to reflect the current CEO’s tenure and the launch of the one-off REGP in 2010. The three-year charts cover the performance
period of the 2011-2013 cycles of BIP and ESOS.
3 years
REED ELSEVIER PLC vs FTSE 100 – 3 YEARS TSR
REED ELSEVIER NV vs AEX – 3 YEARS TSR
%
250
225
200
175
150
125
100
75
50
+86%
∆=59%
+27%
%
250
225
200
175
150
125
100
75
50
+90%
∆=65%
+25%
Dec-10
Dec-11
Reed Elsevier PLC
Dec-12
FTSE 100
Dec-13
Dec-10
Dec-11
Dec-12
Dec-13
Reed Elsevier NV
AEX Index
4 years
REED ELSEVIER PLC vs FTSE100 – 4 YEARS TSR
REED ELSEVIER NV vs AEX – 4 YEARS TSR
%
250
225
200
175
150
125
100
75
50
+111%
∆=67%
+44%
%
250
225
200
175
150
125
100
75
50
+122%
∆=83%
+39%
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Reed Elsevier PLC
FTSE 100
Reed Elsevier NV
AEX Index
5 years
REED ELSEVIER PLC vs FTSE100 – 5 YEARS TSR
REED ELSEVIER NV vs AEX – 5 YEARS TSR
%
250
225
200
175
150
120
125
100
100
75
50
80
+112%
∆=23%
+89%
%
250
225
200
175
150
125
100
75
50
+123%
∆=33%
+90%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
REED
Reed Elsevier PLC
60
FTSE 100
Reed Elsevier NV
AEX Index
40
120
29275_SAS_p078-094 DIR_REMREP v25.indd 92
07/03/2014 11:16
FTSE
100
80
60
40
Reed Elsevier Annual Reports and Financial Statements 2013
93
Performance graphs and CEO historic pay table (continued)
The table below shows the historic CEO pay over a six-year period. 2008 has been included to show the pre-2009 position, as 2009 was a
transition year with three CEO incumbents.
£’000
CEO
2008
2009 4
2010
2011
2012
2013
Sir Crispin
Davis
Sir Crispin
Davis
Ian
Smith
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Erik
Engstrom
Annualised base salary
Annual incentive payout as
a % of maximum
Multi-year incentive vesting
as a % of maximum
CEO total (New UK basis)1
CEO total (Dutch Civil Code
basis)2
CEO total (Consistent with
prior disclosure)3
1,181
61%
1,181
30%
900
37%
1,000
71%
1,000
67%
1,025
66%
1,051
73%
1,077
70%
100%
0%
0%
7,193
6,631
706
(514)
1,033
1,033
7,673
693
1,033
0%
426
431
378
0%
0%
70%5
96%5
3,140
2,675
2,738
5,045
11,1456
5,443
5,425
6,067
2,737
2,535
8,0116
4,068
1. New UK basis: This is described in footnote 1 to the Single Total Figure table on page 86.
2. Dutch Civil Code basis: This is described in footnote 2 to the Single Total Figure table on page 86.
3. Consistent with prior disclosure: This is described in footnote 3 to the Single Total Figure table on page 86.
4. Sir Crispin Davis was CEO from 1 January to 31 March, Ian Smith was CEO from 1 April to 10 November and Erik Engstrom was CEO from 11 November to 31 December.
5. The 2012 percentage reflects BIP and REGP and the 2013 percentage reflects BIP and ESOS.
6. The 2012 figure for Erik Engstrom reflects the vesting of tranche 1 of the REGP and the 2010 BIP, both measured over the 2010-12 period. The REGP figure reflects the entire
amount that was performance tested over the 2010-12 period, including the 50% of shares deferred until 2015 in accordance with the plan rules.
Comparison of change in CEO pay with change in employee pay
The table below shows the percentage change in remuneration
(salary, benefits and annual incentive) from 2012 to 2013 for the
CEO compared with the average employee.
Salary
Benefits
Annual incentive
% change from 2012 to 2013
CEO
2.5%
–1.5%
–1.4%
Average employee*
2.5%
2.5%
2.5%
Multi-year incentives: The award levels (% of salary) for 2014 are:
BIP opportunity
LTIP
ESOS
CEO
100%
250%
250%
CFO
100%
200%
200%
The targets and vesting scales for the multi-year incentive awards
granted in 2014 are as follows:
BIP: 2014-16 cycle
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
* This reflects a substantial proportion of our global employee population.
Relative importance of spend on pay
The following table sets out the total employee costs for all
employees, as well as the amounts paid in dividends and
share repurchases.
2013 (£m)
2012 (£m)
% change
Employee costs*
1,775
1,845
Dividends
Share repurchases
549
600
521
250
–4%
5%
140%
* Employee costs include wages and salaries, social security costs, pensions and
share-based and related remuneration.
Implementation of remuneration policy in 2014
Salary: The Committee has awarded a salary increase of 2.5% to
Erik Engstrom, which means that, from 1 January 2014, his salary
rose to £1,103,813. This is within the guidelines agreed for
employees in Reed Elsevier’s most significant locations globally
for 2014. There was no increase to Duncan Palmer’s salary.
AIP: The operation of the AIP in 2014 remains the same as in 2013,
with the exception of the introduction of claw-back provisions.
Annual financial targets and KPOs are not disclosed as the Board
believes that these are commercially sensitive and that disclosing
them would give competitors an unfair insight into our strategic
direction and annual execution plans. The targets are designed to
be challenging relative to the 2014 execution plan.
Match earned on personal
investment
Average growth in adjusted
EPS over the three-year
performance period*
0%
50%
75%
100%
below 4% p.a.
4% p.a.
6.5% p.a.
9% p.a. or above
ROIC in the third
year of the
performance
period*
below 11.6%
11.6%
12.1%
12.6% or above
G
o
v
e
r
n
a
n
c
e
* EPS and ROIC have equal weighting and straight-line vesting applies to
performance between the points.
LTIP: 2014-16 cycle
Vesting is dependent on three separate performance measures
of equal weighting: a TSR measure, an EPS measure and a
ROIC measure.1
Vesting percentage of each third
of the TSR tranche2
TSR ranking within the relevant
TSR comparator group
0%
30%
100%
Below median
Median
Upper quartile
1. The calculation methodology for TSR, EPS and ROIC is set out in the 2013 Notices
of Annual General Meetings, which can be found on the company’s website. The
methodology for selecting the TSR comparator group companies is unchanged
from 2013 (see page 89).
2. Vesting is on a straight-line basis for performance between the minimum and
maximum levels.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p078-094 DIR_REMREP v25.indd 93
07/03/2014 11:16
94
GOVERNANCE
DIRECTORS' REMUNERATION REPORT
Vesting percentage of EPS
and ROIC tranches*
Average growth in adjusted
EPS over the three-year
performance period
0%
33%
52.5%
65%
75%
85%
92.5%
100%
below 5% p.a.
5% p.a.
6% p.a.
7% p.a.
8% p.a.
9% p.a.
10% p.a.
11% p.a. or above
ROIC in the third
year of the
performance
period
below 11.6%
11.6%
11.85%
12.1%
12.35%
12.6%
12.85%
13.1% or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth/ROIC percentages.
ESOS: 2014-2016 cycle
Proportion of the award vesting
Average growth in adjusted EPS over the
three-year performance period*
0%
33%
80%
100%
below 4% p.a.
4% p.a.
6% p.a.
8% p.a. or above
* Vesting is on a straight-line basis for performance between the stated average
adjusted EPS growth percentages.
Non-Executive Directors’ fees: Changes to Non-Executive Director
fee levels, from 1 January 2014, are as follows:
Fees for the Senior Independent Director and the
Remuneration Committee Chairman will be increased from
£20,000 to £25,000; and
The following Committee membership fees apply:
£12,500 per annum
– Audit Committee member
– Remuneration Committee member £12,500 per annum
£7,500/€9,000 per
– Nominations Committee member
annum.
Remuneration Committee advice
The Committee consists of independent Non-Executive Directors
and the Chairman of Reed Elsevier Group plc. Details of members
and their attendance are contained in the section, “Structure and
corporate governance”, on page 73. The Chief Legal Officer and
Company Secretary attends meetings as secretary to the
Committee. At the invitation of the Chairman of the Committee,
the CEO of Reed Elsevier Group plc attends appropriate parts of
the meetings. The CEO of Reed Elsevier Group plc is not in
attendance during discussions about his remuneration.
The Human Resources Director advised the Committee during
the year.
Towers Watson is the external adviser, appointed by the
Committee through a competitive process. Towers Watson also
provided actuarial and other human resources consultancy
services to some Reed Elsevier companies during the year. The
Committee is satisfied that the firm’s advice continues to be
objective and independent, and that no conflict of interest exists.
The individual consultants who work with the Committee do not
provide advice to the Executive Directors, or act on their behalf.
Towers Watson is a member of the Remuneration Consultants’
Group and conducts its work in line with the UK Code of Conduct
for executive remuneration consulting. During 2013, Towers
Watson received fees of £58,172 for advice given to the Committee,
charged on a time and expense basis.
Shareholder Vote at 2013 Annual General Meetings
At the Annual General Meeting of Reed Elsevier NV, on 24 April 2013, votes cast by proxy and at the meeting in respect of the Directors’
remuneration were as follows:
Resolution
Votes For
% For
Votes Against
% Against
Total votes cast
Votes Withheld
Amendment to remuneration
policy (approval)
458,169,301
97.49%
11,809,279
2.51%
469,978,580
2,019,615
New LTIP 2013 (approval)
458,632,132
97.42%
12,147,289
2.58%
470,779,421
1,218,774
Renewal of ESOS 2013 (approval)
437,897,046
93.02%
32,880,775
6.98%
470,777,821
1,220,374
At the Annual General Meeting of Reed Elsevier PLC, on 25 April 2013, votes cast by proxy and at the meeting in respect of the Directors’
remuneration were as follows:
Resolution
Votes For
% For
Votes Against
% Against
Total votes cast
Votes Withheld
Remuneration Report (advisory)
756,447,901
84.99%
133,639,746
15.01%
890,087,647
32,006,721
New LTIP 2013 (approval)
816,986,538
91.78%
73,127,112
8.22%
890,113,650
31,981,467
Renewal of ESOS 2013 (approval)
826,736,423
89.84%
93,459,084
10.16%
920,195,507
1,899,610
Wolfhart Hauser
Chairman, Remuneration Committee
26 February 2014
29275_SAS_p078-094 DIR_REMREP v25.indd 94
07/03/2014 11:16
Reed Elsevier Annual Reports and Financial Statements 2013
95
Report of the Audit Committees
This report has been prepared by the Audit Committees of
Reed Elsevier PLC and Reed Elsevier NV in conjunction with the
Audit Committee of Reed Elsevier Group plc (the Committees)
and has been approved by the respective Boards. It provides an
overview of the membership, responsibilities and activities of
the Committees. The functions of an audit committee in respect
of the financing activities are carried out by the Supervisory
Board of Elsevier Reed Finance BV. The Reed Elsevier PLC and
Reed Elsevier NV Audit Committees fulfil their roles from the
perspective of the parent companies and both Committees
have access to the reports to and the work of the Reed Elsevier
Group plc Audit Committee and the Elsevier Reed Finance BV
Supervisory Board in this respect.
Membership
The Committees comprise at least three independent
Non-Executive Directors. The members of each of the
Committees that served during the year are: Ben van der Veer
(Chairman of the Committees), Sir David Reid (until April 2013),
Adrian Hennah and Linda Sanford. Adrian Hennah, a UK chartered
accountant, and Ben van der Veer, a registered accountant in the
Netherlands, are considered to have significant, recent and
relevant financial experience.
Responsibilities
The main role and responsibilities of the Committees are to assist
the respective Boards in fulfilling their oversight responsibilities
regarding:
the integrity of Reed Elsevier’s interim and financial
statements and reporting process;
risk management and internal controls, and the effectiveness
of the internal auditors; and
the effectiveness, performance and qualifications of the
external auditors, including monitoring their independence
and objectivity.
The Committees report to the respective Boards on their
activities, identifying any matters in respect of which they consider
that action or improvement is needed and making
recommendations as to the steps to be taken.
Financial reporting
In discharging their responsibilities in respect of the 2013 interim
and financial statements, the Committees have:
reviewed and discussed areas of significant judgement in the
preparation of the financial statements, including in particular:
i. the carrying values of goodwill and intangible assets – the
judgements in respect of asset carrying values relate to the
assumptions underlying the value in use calculations
including discount rates and long-term growth
assumptions. The Committees received and discussed a
report from the Reed Elsevier Group plc group financial
controller on the methodology and the basis of the
assumptions used.
ii. capitalisation of internally generated intangible assets – the
capitalisation of costs related to the development of new
products and business infrastructure, together with the
useful economic lives applied to the resulting assets,
requires the exercise of judgement. The Committees
received reports from the Reed Elsevier Group plc financial
controller on the amounts capitalised and asset lives
selected for major projects.
iii. uncertain tax positions – assessing potential liabilities
across numerous jurisdictions is complex and requires
judgement in making tax determinations. The Committees
received and discussed reports from the Reed Elsevier
Group plc head of group taxation on the potential liabilities
identified and estimates applied.
The Committees also received detailed written and verbal
reports from the external auditors on these matters. The
Committees were satisfied with the explanations provided and
conclusions reached.
reviewed the critical accounting policies and compliance with
applicable accounting standards and other disclosure
requirements and received regular update reports on
accounting and regulatory developments.
considered whether the annual report taken as a whole was
fair, balanced and understandable.
G
o
v
e
r
n
a
n
c
e
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
The terms of reference of each Audit Committee are reviewed
annually and a copy of each is published on the Reed Elsevier
website, www.reedelsevier.com.
Risk management and internal controls
With respect to their oversight of risk management and internal
controls, the Committees have:
Committee meetings
The Committees met five times during 2013. The Audit Committee
meetings are typically attended by the Chief Executive Officer, the
Chief Financial Officer, the Reed Elsevier Group plc group financial
controller, the Reed Elsevier Group plc chief legal officer and
director of internal audit, and audit partners from the external
auditors. Additionally, in 2013, senior representatives of the
external auditors of Elsevier Reed Finance BV attended the July
and February meetings of the parent company Audit Committees.
received and discussed regular reports summarising the
status of Reed Elsevier risk management activities and the
findings from internal audit reviews and the actions agreed
with management. Areas of focus in 2013 included:
management of investment programmes; regulatory
compliance and review of information security including the
management of data privacy; business continuity planning; and
continued compliance with the requirements of Section 404 of
the US Sarbanes-Oxley Act relating to the documentation and
testing of internal controls over financial reporting.
reviewed and approved the internal audit plan for 2013 and
monitored execution, including progress in respect of
recommendations made.
reviewed the resources, terms of reference and effectiveness
of the Reed Elsevier Group plc risk management and internal
audit functions.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p095-096.indd 95
07/03/2014 11:21
96
GOVERNANCE
REPORT OF THE AUDIT COMMITTEES
received presentations from: the Reed Elsevier Group plc chief
compliance officer on the compliance programmes, including
the operation of Reed Elsevier’s codes of conduct, training
programmes and whistleblowing arrangements; the Reed
Elsevier Inc. general counsel on the management of data
privacy, security and compliance; the Reed Elsevier Group plc
IT security officer on information technology security; and
the Reed Elsevier Group plc chief legal officer on legal issues
and claims.
received updates from the Reed Elsevier Group plc group
treasurer on pension arrangements and funding, treasury
policies and risk management, compliance with treasury
policies, and global insurance arrangements.
received presentations from the Reed Elsevier Group plc head
of group taxation on tax policies and related matters.
received regular updates from the Chief Financial Officer on
developments within the finance function.
received presentations on a rotational basis from the chief
financial officers of major businesses on the priorities for the
finance functions and the risk management and internal
control activities.
External audit effectiveness
Reed Elsevier has a well-established policy on audit effectiveness
and independence of auditors that sets out inter alia: the
responsibilities of each Audit Committee in the selection of
auditors to be proposed for appointment or re-appointment and
for agreement on the terms of their engagement, scope and
remuneration; the auditor independence requirements and the
policy on the provision of non-audit services; the rotation of audit
partners and staff; and the conduct of meetings between the
auditors and the Audit Committees. The policy is available on the
Reed Elsevier website, www.reedelsevier.com.
The auditors are precluded from engaging in non-audit
services that would compromise their independence or violate
any professional requirements or regulations affecting their
appointment as auditors. The auditors may, however, provide
non-audit services which do not conflict with their independence,
and where their skills and experience make them a logical
supplier, subject to pre-approval by the Audit Committees. The
Committees have, each quarter, reviewed and agreed the
non-audit services provided in 2013, together with the associated
fees which are set out in note 3 to the combined financial
statements. The non-audit services provided were in the areas of
audit-related activities such as royalty assurance, tax advice and
compliance, due diligence and other transaction-related services.
Non-audit services performed in the Netherlands are limited to
audit-related activities.
The external auditors have confirmed their independence and
compliance with the Reed Elsevier policy on auditor independence
to the Audit Committees.
Deloitte LLP and Deloitte Accountants BV or their predecessor
firms were first appointed auditors of Reed Elsevier PLC and Reed
Elsevier NV respectively for the financial year ended 31 December
1994. The auditors are required to rotate the lead audit partners
responsible for the audit engagements every five years. The lead
engagement partner for Reed Elsevier PLC has now completed his
fifth year and is required to rotate off the audit. The lead engagement
partner for Reed Elsevier NV has completed four years.
The Committees conducted their annual review of the
performance of the external auditors and the effectiveness of
the external audit process for the year ended 31 December 2013.
The review was based on a survey of key stakeholders across
Reed Elsevier, consideration of public reports by regulatory
authorities on key Deloitte member firms and the quality of the
auditors’ reporting to and interaction with the Audit Committees.
Based on this review, the Audit Committees were satisfied with
the performance of the auditors and the effectiveness of the
audit process.
Any decision to open the audit to tender is taken only on the
recommendation of the Audit Committees. The Committees have
monitored regulatory developments in the UK and the Netherlands
regarding length of audit tenure, tendering and audit firm rotation.
In light of the transition of the Reed Elsevier Chief Financial Officer
and the continued objectivity, independence and effectiveness of
Deloitte LLP and Deloitte Accountants BV, the Audit Committees
have concluded that it will neither be appropriate nor necessary to
change auditors or hold a tender during 2014.
The Committees have, therefore, recommended to the respective
Boards that resolutions for the re-appointment of the external
auditors be proposed at the forthcoming Annual General Meetings.
An audit tender will, however, be undertaken in due course in
line with the transitional arrangements applicable in the UK
and the Netherlands; the timing of this will be discussed by
the Committees during 2014. Under current legislation in the
Netherlands, Deloitte would not be eligible to participate in any
such tender.
The effectiveness of the operation of the Audit Committees was
reviewed as part of the effectiveness review of the Boards in
February 2014.
Ben van der Veer
Chairman of the Audit Committees
26 February 2014
29275_SAS_p095-096.indd 96
07/03/2014 11:21
Reed Elsevier Annual Reports and Financial Statements 2013
97
Financial
statements
and other
information
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
In this section
98 Combined financial statements
102 Accounting policies
108 Notes to the combined
financial statements
138 Independent auditors’ report
141 Summary combined financial
information in euros
155 Reed Elsevier PLC Annual Report and
Financial Statements
177 Reed Elsevier NV Annual Report and
Financial Statements
201 Other information
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 97
07/03/2014 11:25
98
98
FINANCIAL STATEMENTS AND OTHER INFORMATION
FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
COMBINED FINANCIAL STATEMENTS
Combined income statement
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration and other expenses
Operating profit before joint ventures
Share of results of joint ventures
Operating profit
Finance income
Finance costs
Net finance costs
Disposals and other non operating items
Profit before tax
Current tax
Deferred tax
Tax expense
Net profit for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Net profit for the year
Note
1
2
7
7
8
9
2013
£m
6,035
(2,118)
3,917
(1,005)
(1,565)
1,347
29
1,376
10
(206)
(196)
16
1,196
(352)
271
(81)
1,115
Restated
2012
£m
6,116
(2,139)
3,977
(1,015)
(1,653)
1,309
24
1,333
16
(243)
(227)
45
1,151
(153)
51
(102)
1,049
1,110
5
1,115
1,044
5
1,049
Combined statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Net profit for the year
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve (net of tax)
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified to profit or loss
Other comprehensive loss for the year
Total comprehensive income for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Total comprehensive income for the year
Note
2013
£m
Restated
2012
£m
1,115
1,049
5
9
18
9
40
(24)
16
(88)
–
65
(2)
(15)
(40)
(24)
1,091
1,086
5
1,091
(293)
96
(197)
(136)
11
70
21
(19)
(53)
(250)
799
794
5
799
29275_SAS_p097-137.indd 98
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
99
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Tax paid (net)
Net cash from operating activities
Cash flows from investing activities
Acquisitions
Purchases of property, plant and equipment
Expenditure on internally developed intangible assets
Purchase of investments
Proceeds from disposals of property, plant and equipment
Gross proceeds from business disposals
Payments on business disposals
Dividends received from joint ventures
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders of the parent companies
Distributions to non-controlling interests
Increase/(decrease) in short term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Disposal of non-controlling interests
Repurchase of ordinary shares
Proceeds on issue of ordinary shares
Net cash used in financing activities
Note
11
11
2013
£m
2012
£m
1,943
(200)
5
(362)
1,386
(221)
(57)
(251)
(10)
6
311
(116)
22
(316)
(549)
(6)
169
184
(915)
(10)
–
(600)
125
(1,602)
1,847
(231)
7
(216)
1,407
(316)
(70)
(263)
(7)
7
235
(82)
20
(476)
(521)
(4)
(434)
592
(437)
(4)
7
(250)
48
(1,003)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Decrease in cash and cash equivalents
11
(532)
(72)
Movement in cash and cash equivalents
At start of year
Decrease in cash and cash equivalents
Exchange translation differences
At end of year
641
(532)
23
132
726
(72)
(13)
641
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 99
07/03/2014 11:25
100 FINANCIAL STATEMENTS AND OTHER INFORMATION
COMBINED FINANCIAL STATEMENTS
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Goodwill
Intangible assets
Investments in joint ventures
Other investments
Property, plant and equipment
Deferred tax assets
Derivative financial instruments
Current assets
Inventories and pre-publication costs
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings
Taxation
Provisions
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Net pension obligations
Provisions
Liabilities associated with assets held for sale
Total liabilities
Net assets
Capital and reserves
Combined share capitals
Combined share premiums
Combined shares held in treasury
Translation reserve
Other combined reserves
Combined shareholders’ equity
Non-controlling interests
Total equity
Note
14
15
16
16
17
19
20
21
11
22
23
24
26
24
19
5
26
22
27
27
27
28
2013
£m
4,576
3,124
125
92
237
442
64
8,660
142
1,416
124
132
1,814
21
10,495
2,595
4
648
588
17
3,852
13
2,633
1,076
379
116
4,217
3
8,072
2,423
224
2,887
(1,464)
(137)
880
2,390
33
2,423
2012
£m
4,545
3,275
100
79
264
79
138
8,480
159
1,380
57
641
2,237
297
11,014
2,544
11
730
603
30
3,918
–
3,162
919
466
139
4,686
96
8,700
2,314
223
2,727
(899)
(23)
252
2,280
34
2,314
29275_SAS_p097-137.indd 100
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
Combined statement of changes in equity
Combined
share
capitals
£m
223
Combined
share
premiums
£m
2,723
Combined
shares held
in treasury
£m
(663)
Translation
reserve
£m
88
Other
combined
reserves
£m
Combined
shareholders’
equity
£m
Non-
controlling
interests
£m
(199)
2,172
Note
13
13
Balance at 1 January 2012
Total comprehensive income
for the year
Dividends paid
Issue of ordinary shares, net of
expenses
Repurchase of ordinary shares
Increase in share based
remuneration reserve
Settlement of share awards
Acquisitions
Disposal of non-controlling
interests
Exchange differences on
translation of capital and
reserves
Balance at 1 January 2013
Total comprehensive income
for the year
Dividends paid
Issue of ordinary shares, net of
expenses
Repurchase of ordinary shares
Increase in share based
remuneration reserve
(net of tax)
Settlement of share awards
Exchange differences on
translation of capital and
reserves
Balance at 31 December 2013
–
–
1
–
–
–
–
–
–
–
47
–
–
–
–
–
(1)
223
(43)
2,727
–
–
1
–
–
–
–
–
124
–
–
–
–
–
–
(250)
–
7
–
–
7
(899)
–
–
–
(600)
–
40
(136)
–
930
(521)
–
–
–
–
–
–
25
(23)
(88)
–
–
–
–
–
–
–
31
(7)
–
6
12
252
1,174
(549)
–
–
48
(40)
794
(521)
48
(250)
31
–
–
6
–
2,280
1,086
(549)
125
(600)
48
–
–
224
36
(5)
2,887
(1,464)
(26)
(137)
(5)
880
–
2,390
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
101
Total
equity
£m
2,197
799
(525)
48
(250)
31
–
9
7
(2)
2,314
1,091
(555)
125
(600)
48
–
–
2,423
25
5
(4)
–
–
–
–
9
1
(2)
34
5
(6)
–
–
–
–
–
33
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 101
07/03/2014 11:25
102 FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
The Reed Elsevier combined financial statements are prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and as issued by the
International Accounting Standards Board (IASB). The combined
financial statements are prepared on a going concern basis,
as explained on page 76.
The Reed Elsevier accounting policies under IFRS are set
out below.
Basis of preparation
The equalisation agreement between Reed Elsevier PLC and Reed
Elsevier NV has the effect that their shareholders can be regarded
as having the interests of a single economic group. The Reed
Elsevier combined financial statements (“the combined financial
statements”) represent the combined interests of both sets of
shareholders and encompass the businesses of Reed Elsevier
Group plc and Elsevier Reed Finance BV and their respective
subsidiaries, associates and joint ventures, together with the two
parent companies, Reed Elsevier PLC and Reed Elsevier NV (“the
combined businesses”).
In preparing the combined financial statements, subsidiaries of
Reed Elsevier Group plc and Elsevier Reed Finance BV are
accounted for under the acquisition method and investments in
associates and joint ventures are accounted for under the equity
method. All transactions and balances between the combined
businesses are eliminated.
On acquisition of a subsidiary, or interest in an associate or joint
venture, fair values, reflecting conditions at the date of acquisition,
are attributed to the net assets, including identifiable intangible
assets acquired. This includes those adjustments made to bring
accounting policies into line with those of the combined
businesses. The results of subsidiaries sold or acquired are
included in the combined financial statements up to or from the
date that control passes from or to the combined businesses.
Non-controlling interests in the net assets of the combined
businesses are identified separately from combined
shareholders’ equity. Non-controlling interests consist of the
amount of those interests at the date of the original acquisition
and the non-controlling share of changes in equity since the
date of acquisition.
These financial statements form part of the statutory information
to be provided by Reed Elsevier NV, but are not for a legal entity
and do not include all the information required to be disclosed by a
company in its financial statements under the UK Companies Act
2006 or the Dutch Civil Code. Additional information is given in the
Annual Reports and Financial Statements of the parent
companies set out on pages 155 to 199. A list of principal
businesses is set out on page 211.
Foreign exchange translation
The combined financial statements are presented in pounds
sterling. Additional information providing a translation into euros
of the primary Reed Elsevier combined financial statements and
selected notes is presented on pages 142 to 154.
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the transaction. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rate prevailing on the statement of financial
position date. Exchange differences arising are recorded in the
income statement other than where hedge accounting applies as
set out below.
Assets and liabilities of foreign operations are translated at
exchange rates prevailing on the statement of financial position
date. Income and expense items and cash flows of foreign
operations are translated at the average exchange rate for the
period. Significant individual items of income and expense and
cash flows in foreign operations are translated at the rate
prevailing on the date of transaction. Exchange differences arising
are classified as equity and transferred to the translation reserve.
When foreign operations are disposed of, the related cumulative
translation differences are recognised within the income
statement in the period.
Reed Elsevier uses derivative financial instruments, primarily
forward contracts, to hedge its exposure to certain foreign
exchange risks. Details of Reed Elsevier’s accounting policies in
respect of derivative financial instruments are set out below.
Revenue
Revenue represents the invoiced value of sales less anticipated
returns on transactions completed by performance, excluding
customer sales taxes.
Revenues are recognised for the various categories of turnover
as follows: subscriptions – on periodic despatch of subscribed
product or rateably over the period of the subscription where
performance is not measurable by despatch; transactional –
on despatch or occurrence of the transaction and advertising –
on publication or over the period of online display.
Where sales consist of two or more independent components
whose value can be reliably measured, revenue is recognised on
each component as it is completed by performance, based on
attribution of relative value.
Employee benefits
The expense of defined benefit pension schemes and other
post-retirement employee benefits is determined using the
projected unit credit method and charged in the income statement
as an operating expense, based on actuarial assumptions
reflecting market conditions at the beginning of the financial year.
Actuarial gains and losses are recognised in full in the statement
of comprehensive income in the period in which they occur.
Past service costs are recognised immediately at the earlier of
when plan amendments or curtailments occur and when related
restructuring costs or termination benefits are recognised.
Settlements are recognised when they occur.
Net pension obligations in respect of defined benefit schemes are
included in the statement of financial position at the present value
of scheme liabilities, less the fair value of scheme assets. Where
schemes are in surplus, i.e. assets exceed liabilities, the net
pension assets are separately included in the statement of
financial position. Any net pension asset is limited to the extent that
the asset is recoverable through reductions in future contributions.
The expense of defined contribution pension schemes and other
employee benefits is charged in the income statement as incurred.
29275_SAS_p097-137.indd 102
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
103
Share based remuneration
The fair value of share based remuneration is determined at the
date of grant and recognised as an expense in the income
statement on a straight line basis over the vesting period, taking
account of the estimated number of shares that are expected to
vest. Market based performance criteria are taken into account
when determining the fair value at the date of grant. Non-market
based performance criteria are taken into account when
estimating the number of shares expected to vest. The fair value of
share based remuneration is determined by use of a binomial or
Monte Carlo simulation model as appropriate. All Reed Elsevier’s
share based remuneration is equity settled.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of an asset that takes a substantial
period of time to bring to use are capitalised. All other interest
on borrowings is expensed as incurred. The cost of issuing
borrowings is generally expensed over the period of borrowing
so as to produce a constant periodic rate of charge.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
which is recognised, in the same or a different period, outside profit
or loss (either in other comprehensive income, directly in equity, or
through a business combination) in which case the tax appears in
the same statement as the transaction that gave rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that
taxable profits will be available against which the deductible
temporary differences can be utilised, and reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Deferred tax is not discounted.
Goodwill
On the acquisition of a subsidiary or business, the purchase
consideration is allocated between the net tangible and intangible
assets on a fair value basis, with any excess purchase
consideration representing goodwill. Goodwill arising on
acquisitions also includes amounts corresponding to deferred tax
liabilities recognised in respect of acquired intangible assets.
Goodwill is recognised as an asset and reviewed for impairment
when there is an indicator that the asset may be impaired and at
least annually. Any impairment is recognised immediately in the
income statement and not subsequently reversed.
On disposal of a subsidiary or business, the attributable amount
of goodwill is included in the determination of the profit or loss
on disposal.
Intangible assets
Intangible assets acquired as part of a business combination are
stated in the statement of financial position at their fair value as at
the date of acquisition, less accumulated amortisation. Internally
generated intangible assets are stated in the statement of
financial position at the directly attributable cost of creation of the
asset, less accumulated amortisation.
Intangible assets acquired as part of business combinations
comprise: market related assets (e.g. trademarks, imprints,
brands); customer related assets (e.g. subscription bases,
customer lists, customer relationships); editorial content;
software and systems (e.g. application infrastructure, product
delivery platforms, in process research and development);
contract based assets (e.g. publishing rights, exhibition rights,
supply contracts); and other intangible assets. Internally
generated intangible assets typically comprise software and
systems development where an identifiable asset is created that is
probable to generate future economic benefits.
Intangible assets, other than brands and imprints determined to
have indefinite lives, are amortised on a straight line basis over
their estimated useful lives. The estimated useful lives of
intangible assets with finite lives are as follows: market and
customer related assets – 3 to 40 years; content, software and
other acquired intangible assets – 3 to 20 years; and internally
developed intangible assets – 3 to 10 years. Brands and imprints
determined to have indefinite lives are not amortised and are
subject to impairment review at least annually.
Property, plant and equipment
Property, plant and equipment are stated in the statement of
financial position at cost less accumulated depreciation. No
depreciation is provided on freehold land. Freehold buildings and
long leases are depreciated over their estimated useful lives up to a
maximum of 50 years. Short leases are written off over the duration
of the lease. Depreciation is provided on other assets on a straight
line basis over their estimated useful lives as follows: leasehold
improvements – shorter of life of lease and 10 years; plant – 3 to 20
years; office furniture, fixtures and fittings – 5 to 10 years; computer
systems, communication networks and equipment – 3 to 7 years.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 103
07/03/2014 11:25
104 FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
Investments
Investments, other than investments in joint arrangements and
associates, are stated in the statement of financial position at fair
value. Investments held as part of the venture capital portfolio are
classified as held for trading, with changes in fair value reported in
disposals and other non operating items in the income statement.
All other investments are classified as available for sale with
changes in fair value recognised directly in equity until the
investment is disposed of or is determined to be impaired, at which
time the cumulative gain or loss previously recognised in equity is
brought into the net profit or loss for the period. All items
recognised in the income statement relating to investments, other
than investments in joint arrangements and associates, are
reported as disposals and other non operating items.
Available for sale investments and venture capital investments
held for trading represent investments in listed and unlisted
securities. The fair value of listed securities is determined based
on quoted market prices, and of unlisted securities on
management’s estimate of fair value based on standard valuation
techniques, including market comparisons and discounts of future
cash flows, having regard to maximising the use of observable
inputs and adjusting for risk. Advice from valuation experts is used
as appropriate.
All joint arrangements are classified as joint ventures because
Reed Elsevier shares joint control and has rights to the net assets
of the arrangements. Investments in joint ventures and associates
are accounted for under the equity method and stated in the
statement of financial position at cost as adjusted for post-
acquisition changes in Reed Elsevier’s share of net assets, less
any impairment in value.
Impairment
At each statement of financial position date, the carrying amounts
of tangible and intangible assets and goodwill are reviewed to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount, which is the higher of value in use and fair
value less costs to sell, of the asset is estimated in order to
determine the extent, if any, of the impairment loss. Where the
asset does not generate cash flows that are independent from
other assets, value in use estimates are made based on the cash
flows of the cash generating unit to which the asset belongs.
Intangible assets with an indefinite useful life are tested for
impairment at least annually and whenever there is any indication
that the asset may be impaired.
If the recoverable amount of an asset or cash generating unit is
estimated to be less than its net carrying amount, the net carrying
amount of the asset or cash generating unit is reduced to its
recoverable amount. Impairment losses are recognised
immediately in the income statement in administration and
other expenses.
Inventories and pre-publication costs
Inventories and pre-publication costs are stated at the lower of
cost, including appropriate attributable overhead, and estimated
net realisable value. Pre-publication costs, representing costs
incurred in the origination of content prior to publication, are
expensed systematically reflecting the expected sales profile over
the estimated economic lives of the related products, generally up
to five years.
Leases
Assets held under leases which confer rights and obligations
similar to those attaching to owned assets are classified as assets
held under finance leases and capitalised within property, plant
and equipment or software and the corresponding liability to pay
rentals is shown net of interest in the statement of financial
position as obligations under finance leases. The capitalised value
of the assets is depreciated on a straight line basis over the
shorter of the periods of the leases or the useful lives of the assets
concerned. The interest element of the lease payments is
allocated so as to produce a constant periodic rate of charge.
Operating lease rentals are charged to the income statement on a
straight line basis over the period of the leases. Rental income
from operating leases is recognised on a straight line basis over
the term of the relevant lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits
and other short term highly liquid investments and are held in the
statement of financial position at fair value.
Assets held for sale
Assets of businesses that are available for immediate sale in their
current condition and for which a sales process is considered
highly probable to complete are classified as assets held for sale,
and are carried at the lower of carrying value and fair value less
costs to sell. Fair value is based on anticipated disposal proceeds,
typically derived from firm or indicative offers from potential
acquirers. Non-current assets are not amortised or depreciated
following their classification as held for sale. Liabilities of
businesses held for sale are also separately classified on the
statement of financial position.
Financial instruments
Financial instruments comprise investments (other than
investments in joint ventures or associates), trade receivables,
cash and cash equivalents, payables and accruals, borrowings
and derivative financial instruments.
Investments (other than investments in joint ventures and
associates) are classified as either held for trading or available for
sale, as described above. (These investments are typically
classified as either Level 1 or 2 in the IFRS13 fair value hierarchy.)
The fair value of such investments is based on either quoted
market prices or other observable market inputs.
Trade receivables are carried in the statement of financial position
at invoiced value less allowance for estimated irrecoverable
amounts. Irrecoverable amounts are estimated based on the
ageing of trade receivables, experience and circumstance.
Borrowings and payables are recorded initially at fair value and
subsequently carried at amortised cost (other than fixed rate
borrowings in designated hedging relationships for which the
carrying amount of the hedged portion of the borrowings is
subsequently adjusted for the gain or loss attributable to the
hedged risk).
Derivative financial instruments are used to hedge interest rate
and foreign exchange risks. Changes in the fair value of derivative
financial instruments that are designated and effective as hedges
of future cash flows are recognised (net of tax) directly in equity in
29275_SAS_p097-137.indd 104
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
105
the hedge reserve. If a hedged firm commitment or forecasted
transaction results in the recognition of a non financial asset or
liability, then, at the time that the asset or liability is recognised,
the associated gains or losses on the derivative that had previously
been recognised in equity are included in the initial measurement
of the asset or liability. For hedges that do not result in the
recognition of an asset or a liability, amounts deferred in equity are
recognised in the income statement in the same period in which
the hedged item affects net profit or loss. Any ineffective portion of
hedges is recognised immediately in the income statement.
Derivative financial instruments that are not designated as
hedging instruments are classified as held for trading and
recorded in the statement of financial position at fair value, with
changes in fair value recognised in the income statement.
Where an effective hedge is in place against changes in the fair
value of fixed rate borrowings, the hedged borrowings are
adjusted for changes in fair value attributable to the risk being
hedged with a corresponding income or expense included in the
income statement within finance costs. The offsetting gains or
losses from remeasuring the fair value of the related derivatives
are also recognised in the income statement within finance costs.
When the related derivative expires, is sold or terminated, or no
longer qualifies for hedge accounting, the cumulative change in
fair value of the hedged borrowing is amortised in the income
statement over the period to maturity of the borrowing using the
effective interest method.
The fair values of interest rate swaps, interest rate options,
forward rate agreements and forward foreign exchange contracts
represent the replacement costs calculated using observable
market rates of interest and exchange. The fair value of long term
borrowings is calculated by discounting expected future cash
flows at observable market rates. (These instruments are
accordingly classified as Level 2 in the IFRS13 fair value hierarchy.)
Cash flow hedge accounting is discontinued when a hedging
instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that time, any cumulative
gain or loss on the hedging instrument recognised in equity is
either retained in equity until the firm commitment or forecasted
transaction occurs, or, where a hedged transaction is no longer
expected to occur, is immediately credited or expensed in the
income statement.
Provisions
Provisions are recognised when a present obligation exists as a
result of a past event, the obligation is reasonably estimable, and
it is probable that settlement will be required. Provisions are
measured at the best estimate of the expenditure required to
settle the obligation at the statement of financial position date.
Shares held in treasury
Shares of Reed Elsevier PLC and Reed Elsevier NV that are
repurchased by the respective parent companies and not
cancelled are classified as shares held in treasury. The
consideration paid, including directly attributable costs, is
recognised as a deduction from equity. Shares of the parent
companies that are purchased by the Reed Elsevier Group plc
Employee Benefit Trust are also classified as shares held in
treasury, with the cost recognised as a deduction from equity.
Critical judgements and key sources of estimation uncertainty
The most significant accounting policies in determining the
financial condition and results of the Reed Elsevier combined
businesses, and those requiring the most subjective or complex
judgement, relate to the valuation of goodwill and intangible
assets, capitalisation of development spend and taxation.
Goodwill and acquired intangible assets
On acquisition of a subsidiary or business, the purchase
consideration is allocated between the net tangible and intangible
assets other than goodwill on a fair value basis, with any excess
purchase consideration representing goodwill. The valuation of
acquired intangible assets represents the estimated economic
value in use, using standard valuation methodologies, including as
appropriate, discounted cash flow, relief from royalty and
comparable market transactions. Acquired intangible assets are
capitalised and amortised systematically over their estimated
useful lives, subject to impairment review.
Appropriate amortisation periods are selected based on
assessments of the longevity of the brands and imprints, the
strength and stability of customer relationships, the market
positions of the acquired assets and the technological and
competitive risks that they face. Certain intangible assets in
relation to acquired science and medical publishing businesses
have been determined to have indefinite lives. The longevity of
these assets is evidenced by their long established and well
regarded brands and imprints, and their characteristically stable
market positions.
The carrying amounts of goodwill and indefinite lived intangible
assets in each business are reviewed for impairment at least
annually. The carrying amounts of all other intangible assets are
reviewed where there are indications of possible impairment. An
impairment review involves a comparison of the carrying value of
the asset with estimated values in use based on latest
management cash flow projections. Key areas of judgement in
estimating the values in use of businesses are the growth in cash
flows over a forecast period of up to five years, the long term
growth rate assumed thereafter and the discount rate applied to
the forecast cash flows.
The discount rates used are based on the Reed Elsevier weighted
average cost of capital, adjusted to reflect a risk premium specific
to each business. The pre-tax discount rates applied are 11.1% for
Scientific, Technical & Medical, 11.6% for Risk Solutions,
11.5-12.8% for Business Information, 10.9-12.5% for Legal and
9.5-13.0% for Exhibitions. The nominal long term growth rates,
which are based on historical growth rates and the growth
prospects for businesses is 3%. There were no charges for
impairment of acquired intangible assets and goodwill in 2013
(2012: nil).
A sensitivity analysis has been performed based on changes in key
assumptions considered to be reasonably possible by
management: an increase in the discount rate of 0.5%; a decrease
in the compound annual growth rate for adjusted operating cash
flow in the five-year forecast period of 2.0%; and a decrease in
perpetuity growth rates of 0.5%. The sensitivity analysis shows
that impairment charges resulting from these scenarios
individually would be less than £5m. Further information is
provided in note 14 to the combined financial statements.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 105
07/03/2014 11:25
106 FINANCIAL STATEMENTS AND OTHER INFORMATION
ACCOUNTING POLICIES
Accounting policies
Development spend
Development spend embraces investment in new products and
other initiatives, ranging from the building of online delivery
platforms, to launch costs of new services, to building new
infrastructure applications. Launch costs and other ongoing
operating expenses of new products and services are expensed
as incurred. The costs of building product applications, platforms
and infrastructure are capitalised as intangible assets, where the
investment they represent has demonstrable value and the
technical and commercial feasibility is assured. Costs eligible for
capitalisation must be incremental, clearly identified and directly
attributable to a particular project. The resulting assets are
amortised over their estimated useful lives. Impairment reviews
are carried out at least annually. Judgement is required in the
assessment of the potential value of a development project, the
identification of costs eligible for capitalisation and the selection
of appropriate asset lives.
Taxation
Reed Elsevier is subject to tax in numerous jurisdictions, giving
rise to complex tax issues that require management to exercise
judgement in making tax determinations. While Reed Elsevier is
confident that tax returns are appropriately prepared and filed,
amounts are provided in respect of uncertain tax positions that
reflect the risk with respect to tax matters under active discussion
with tax authorities, or which are otherwise considered to involve
uncertainty. Amounts are provided using the best estimate of tax
expected to be paid based on a qualitative assessment of all
relevant factors. However, it is possible that at some future date
liabilities may be adjusted as a result of audits by taxing
authorities. Discussions with tax authorities relating to cross
border transactions and other matters are ongoing. Although the
outcome of these discussions cannot be predicted, no significant
impact on the financial position of Reed Elsevier is expected.
In addition, estimation of income taxes includes assessments of
the recoverability of deferred tax assets. Deferred tax assets are
only recognised to the extent that they are considered recoverable
based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised. The
recoverability of these assets is reassessed at the end of each
reporting period, and changes in recognition of deferred tax
assets will affect the tax liability in the period of that
reassessment.
Other significant accounting policies
The accounting policies in respect of revenue recognition,
pre-publication costs, property provisioning and pensions are
also significant in determining the financial condition and results
of the Reed Elsevier combined businesses, although the
application of these policies is more straightforward.
Revenue recognition policies, while an area of management focus,
are generally straightforward in application as the timing of
product or service delivery and customer acceptance for the
various revenue types can be readily determined. Allowances for
product returns are deducted from revenues based on historical
return rates. Where sales consist of two or more components
that operate independently, revenue is recognised as each
component is completed by performance, based on attribution
of relative value.
Pre-publication costs incurred in the creation of content prior to
production and publication are typically deferred and expensed
over their estimated useful lives based on sales profiles. Such
costs typically comprise direct internal labour costs and
externally commissioned editorial and other fees. Estimated
useful lives generally do not exceed five years. Annual reviews are
carried out to assess the recoverability of carrying amounts.
Reed Elsevier has exposures to sub lease shortfalls in respect of
certain property leases for periods up to 2024. Provisions are
recognised for net liabilities expected to arise on these exposures.
Estimation of the provisions requires judgement in respect of
future head lease costs, sub lease income and the length of
vacancy periods. The charge for property provisions was nil
(2012: £62m) relating to surplus property arising on the
restructuring, sale and closure of Business Information
businesses and includes expected losses on sub leases entered
into during 2013 and an estimate of vacancy periods and future
market conditions. Further information is provided in note 26 to
the combined financial statements.
Accounting for defined benefit pension schemes involves
judgement about uncertain events, including the life expectancy
of the members, salary and pension increases, inflation and the
rate at which the future pension payments are discounted.
Estimates for these factors are used in determining the pension
cost and liabilities reported in the financial statements. These
best estimates of future developments are made in conjunction
with independent actuaries. Each scheme is subject to a periodic
review by independent actuaries. Details of key assumptions
and sensitivity analysis is provided in note 5 to the combined
financial statements.
Standards and amendments effective for the year
With effect from 1 January 2013, IAS19 – Employee Benefits
(revised) inter alia changes the methodology used in the
calculation of the net pension financing credit or charge in relation
to defined benefit pension schemes. Under the revised standard,
pension asset returns included within the net pension financing
credit or charge are calculated by reference to the discount rate of
high quality corporate bonds (being also the discount rate applied
in the calculation of pension obligations) and are no longer based
on the expected returns on scheme assets. The effect is to reduce
the asset returns recognised in the income statement.
Adoption of IAS19 (revised) has had no impact on Reed Elsevier’s
combined statement of financial position and statement of cash
flows. The net pension financing credit or charge is now presented
within net finance costs in Reed Elsevier’s combined income
statement, rather than within operating profit as previously
reported. Given that the revised standard may introduce greater
volatility to the income statement, the net pension financing credit
or charge has been excluded from the adjusted figures used by
Reed Elsevier as additional performance measures.
As required under the revised standard, comparative figures have
been restated. For the year ended 31 December 2012, operating
profits are £25m lower and net finance costs are £11m higher than
previously reported. On an adjusted basis, profit before tax is
£25m lower.
29275_SAS_p097-137.indd 106
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
107
With effect from 1 January 2013, Reed Elsevier adopted IAS1 –
Presentation of Items of Other Comprehensive Income
(amendments to IAS1). The standard amends the grouping of
items presented in the statement of comprehensive income into
items that may be reclassified to the profit or loss in a future
period and items that will never be reclassified.
With effect from 1 January 2013, Reed Elsevier also adopted
IFRS10 Consolidated Financial Statements, IFRS11 Joint
Arrangements, IFRS12 Disclosure of Interests in Other Entities,
and IFRS13 Fair Value Measurement, in addition to amendments
to IAS27 Consolidated and Separate Financial Statements and
IAS28 Investments in Associates. Adoption of these new
accounting standards and amendments has not had a significant
impact on Reed Elsevier’s accounting policies or reporting. With
the exception of IFRS13, these standards and amendments have
been early adopted for the purposes of Reed Elsevier’s application
of IFRS as adopted by the EU.
Standards, amendments and interpretations not yet effective
New accounting standards and amendments and their expected
impact on the future accounting policies and reporting of Reed
Elsevier are set out below.
IFRS9 – Financial Instruments (effective for the 2015 financial
year). The standard replaces the existing classification and
measurement requirements in IAS39 for financial assets by
requiring entities to classify them as being measured either at
amortised cost or fair value depending on the business model and
contractual cash flow characteristics of the asset. For financial
liabilities, IFRS9 requires an entity choosing to measure a liability
at fair value to present the portion of the change in its fair value
due to changes in the entity’s own credit risk in the other
comprehensive income rather than the income statement.
Adoption of the standard is not expected to have a significant
impact on the measurement, presentation or disclosure of
financial assets and liabilities in the combined financial
statements.
Amendments to IAS36 – Impairment of Assets (effective for the
2014 financial year). These amendments require disclosure of the
recoverable amounts for the assets or CGUs for which an
impairment loss has been recognised or reversed during the
reporting period and are effective retrospectively. Adoption of the
standard is not expected to have a significant impact on disclosure
in the combined financial statements.
Additionally, a number of amendments and interpretations have
been issued which are not expected to have any significant impact
on Reed Elsevier’s accounting policies and reporting.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 107
07/03/2014 11:25
108 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
1 Segment analysis
Reed Elsevier’s reported segments are based on the internal reporting structure and financial information provided to the Chief
Executive Officer and Boards.
Reed Elsevier is a world leading provider of professional information solutions organised as five business segments: Scientific,
Technical & Medical, providing information and tools to help its customers improve scientific and healthcare outcomes; Risk Solutions,
providing tools that combine proprietary, public and third-party information with advanced technology and analytics; Business
Information, providing data services, information and marketing solutions to business professionals; Legal, providing legal, tax,
regulatory news & business information to legal, corporate, government, accounting and academic markets; and Exhibitions,
organising exhibitions and conferences.
Adjusted operating profit is the key segmental profit measure used by Reed Elsevier in assessing performance. Adjusted operating
profit is reconciled to operating profit in note 10.
ANALYSIS BY BUSINESS SEGMENT
Revenue
Operating profit
Adjusted operating profit
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Sub-total
Corporate costs
Total
2013
£m
2,126
933
547
1,567
862
6,035
–
6,035
2012
£m
2,063
926
663
1,610
854
6,116
–
6,116
2013
£m
742
312
71
139
161
1,425
(49)
1,376
Restated
2012
£m
706
281
76
146
171
1,380
(47)
1,333
2013
£m
826
414
107
238
213
1,798
(49)
1,749
Restated
2012
£m
780
392
119
234
210
1,735
(47)
1,688
Share of post-tax results of joint ventures of £29m (2012: £24m) included in operating profit comprises £6m (2012: £2m) relating to Legal
and £23m (2012: £22m) relating to Exhibitions.
ANALYSIS OF REVENUE BY GEOGRAPHICAL ORIGIN
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY GEOGRAPHICAL MARKET
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2013
£m
3,103
985
656
698
593
6,035
2013
£m
3,082
443
166
1,074
1,270
6,035
2012
£m
3,122
966
611
788
629
6,116
2012
£m
3,154
442
165
1,176
1,179
6,116
29275_SAS_p097-137.indd 108
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
109
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
2013
£m
3,971
1,168
896
6,035
2013
£m
3,112
2,683
240
6,035
2012
£m
3,896
1,305
915
6,116
2012
£m
2,978
2,788
350
6,116
Expenditure on
acquired goodwill and
intangible assets
Capital
expenditure
additions
Amortisation
of acquired
intangible assets
Depreciation and
other amortisation
2013
£m
50
164
5
15
56
290
2012
£m
120
15
–
80
178
393
2013
£m
93
25
18
170
15
321
2012
£m
106
21
17
173
25
342
2013
£m
76
97
31
74
40
318
2012
£m
68
109
37
83
32
329
2013
£m
95
22
10
108
14
249
2012
£m
82
23
14
92
16
227
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
1 Segment analysis continued
ANALYSIS OF REVENUE BY FORMAT
Electronic
Print
Face to face
Total
ANALYSIS OF REVENUE BY TYPE
Subscriptions
Transactional
Advertising
Total
ANALYSIS BY BUSINESS SEGMENT
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Total
Capital expenditure comprises additions to property, plant and equipment and internally developed intangible assets. Amortisation of
acquired intangible assets includes amounts in respect of joint ventures of £1m (2012: £1m) in Exhibitions. Other than the depreciation
and amortisation above, non cash items include £31m (2012: £31m) relating to the recognition of share based remuneration, comprising
£6m (2012: £5m) in Scientific, Technical & Medical, £3m (2012: nil) in Risk Solutions, £2m (2012: £3m) in Business Information,
£6m (2012: £7m) in Legal, £4m (2012: £4m) in Exhibitions and £10m (2012: £12m) in Corporate.
ANALYSIS OF NON-CURRENT ASSETS BY GEOGRAPHICAL LOCATION
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2013
£m
6,291
584
125
753
401
8,154
2012
£m
6,514
524
120
729
376
8,263
G
o
v
e
r
n
a
n
c
e
Non-current assets by geographical location exclude amounts relating to deferred tax and derivative financial instruments.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 109
07/03/2014 11:25
110 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
2 Operating profit
Operating profit is stated after charging/(crediting) the following:
Staff costs
Wages and salaries
Social security costs
Pensions
Share based remuneration
Total staff costs
Depreciation and amortisation
Amortisation of acquired intangible assets
Share of joint ventures’ amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Total depreciation and amortisation
Other expenses and income
Pre-publication costs, inventory expenses and other cost of sales
Operating lease rentals expense
Operating lease rentals income
The amortisation of acquired intangible assets is included within administration and other expenses.
3 Auditors’ remuneration
Auditors’ remuneration
Payable to the auditors of the parent companies
Payable to the auditors of the operating and financing businesses
For audit services
Audit related assurance services
Tax services
Due diligence and other transaction related services
For non audit services
Total auditors’ remuneration
Note
5
15
15
17
2013
£m
1,508
175
61
31
1,775
317
1
160
89
567
Restated
2012
£m
1,543
187
89
26
1,845
328
1
151
76
556
2,118
108
(10)
2,139
112
(10)
2013
£m
2012
£m
0.6
4.3
4.9
0.4
1.8
–
2.2
7.1
0.5
4.4
4.9
0.7
0.8
0.3
1.8
6.7
Amounts payable to the auditors of the operating and financing businesses include amounts for the review and testing of internal
controls over financial reporting in accordance with the US Sarbanes-Oxley Act. Non audit services performed in the Netherlands or by
Deloitte B.V. are limited to audit related assurance services. Reed Elsevier’s policy on auditor independence is set out in the Report of the
Audit Committees on page 96.
29275_SAS_p097-137.indd 110
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
111
4 Personnel
NUMBER OF PEOPLE EMPLOYED
Business segment
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Sub-total
Corporate/shared functions
Total
Geographical location
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
5 Pension schemes
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
At 31 December
Average during the year
2013
2012
2013
2012
6,700
3,300
3,900
10,000
3,400
27,300
900
28,200
13,900
4,100
1,600
2,800
5,800
28,200
7,000
4,100
4,800
10,400
3,200
29,500
900
30,400
15,700
4,100
1,600
3,600
5,400
30,400
6,900
3,500
4,200
10,400
3,300
28,300
900
29,200
14,800
4,100
1,600
3,100
5,600
29,200
7,000
4,000
5,200
10,400
3,000
29,600
900
30,500
15,900
4,200
1,600
3,700
5,100
30,500
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
A number of pension schemes are operated around the world. Historically, the major schemes have been of the defined benefit type with
assets held in separate trustee administered funds. The largest defined benefit schemes are in the UK, the US and the Netherlands.
The UK scheme is a final salary scheme and is closed to new hires. Members accrue a portion of their final pensionable earnings based
on the number of years of service. The US scheme is a cash balance scheme and is closed to new hires. Members earn pay credits
dependent on age and years of service which are added to an account balance that accrues interest at a minimum rate of 4% per annum.
The Netherlands scheme is a career average salary scheme and remains open to new hires. Members accrue a portion of their current
salary at a rate calculated to enable them to reach a pension level based on their average salary.
Each of the major defined benefit schemes is administered by a separate fund that is legally separated from Reed Elsevier. The trustees
of the pension funds in the UK and the Netherlands and plan fiduciaries of the US scheme are required by law to act in the interest of the
funds’ beneficiaries. In the UK and in the Netherlands the trustees of the pension fund are responsible for the investment policy with
regard to the assets of the fund. The boards of trustees consist of an equal number of Reed Elsevier appointed and member nominated
directors. In the US, the fiduciary duties for the scheme are allocated between committees which are staffed by senior employees of
Reed Elsevier; the investment committee has the primary responsibility for the investment and management of plan assets.
G
o
v
e
r
n
a
n
c
e
The funding of Reed Elsevier’s major schemes reflects the different rules within each jurisdiction.
In the UK the level of funding is determined by statutory triennial actuarial valuations in accordance with pensions legislation. Where the
scheme falls below 100% funded status, Reed Elsevier and the scheme trustees must agree on how the deficit is to be remedied. The UK
Pensions Regulator has significant powers and sets out in codes and guidance the parameters for scheme funding.
The US scheme has an annual statutory valuation which forms the basis for establishing the employer contribution each year (subject to
ERISA and IRS minimums). Should the statutory funded status fall to below 100%, the US Pensions Protection Act requires the deficit to
be rectified with additional contributions over a 7 year period.
In the Netherlands, the scheme funding level is determined by an annual actuarial valuation as prescribed by the Dutch Pension Act.
If the funding level falls below the statutory minimum a short term recovery plan is negotiated between the plan trustees and filed with
the Dutch Central Bank (DCB). An evaluation of the recovery plan is required to be filed at the DCB annually.
Total regular employer contributions to defined benefit pension schemes in respect of 2014 are expected to be approximately £46m.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 111
07/03/2014 11:25
112 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
5 Pension schemes continued
The pension expense recognised within operating expense is:
Defined benefit pension expense
Defined contribution pension expense
Total
2013
£m
14
47
61
Restated
2012
£m
43
46
89
The amounts recognised in the income statement in respect of defined benefit pension schemes during the year are presented by major
scheme as follows:
Service cost
Settlement, past service and curtailment
credits
Defined benefit pension expense
Net interest on net defined benefit obligation
Net defined benefit pension expense
UK
£m
29
–
29
6
35
2013
NL
£m
15
(8)
7
4
11
US
£m
29
(51)
(22)
9
(13)
Total
£m
73
(59)
14
19
33
Restated
2012
UK
£m
27
(1)
26
5
31
US
£m
28
(19)
9
7
16
NL
£m
8
–
8
(1)
7
Total
£m
63
(20)
43
11
54
Net interest on defined benefit pension scheme liabilities is presented within net finance costs in the income statement. Service cost,
including settlements, past service credits and curtailments is presented within operating expenses.
Settlements and past service credits in 2013 principally relate to plan design changes and the transfer out of certain deferred members
in the US scheme and a reduction in accrued benefits in respect of the scheme in the Netherlands. Settlements and curtailments
recognised in 2012 were a result of changes to plan design and staff reductions.
The significant valuation assumptions, determined for each major scheme in conjunction with the respective independent actuaries are
presented below. The net defined benefit pension expense for each year is based on the assumptions and scheme valuations set at
31 December of the prior year.
As at 31 December
Discount rate
Inflation
UK
4.60%
3.25%
2013
US
5.05%
3.00%
NL
3.60%
2.00%
UK
4.65%
2.85%
2012
US
4.25%
3.00%
NL
3.50%
2.00%
Discount rates are set by reference to AA corporate bond yields.
Mortality assumptions make allowance for future improvements in longevity and have been determined by reference to applicable
mortality statistics. The average life expectancy assumptions are set out below:
Male average life expectancy (at 31 December)
Member currently aged 60 years
Member currently aged 45 years
Female average life expectancy (at 31 December)
Member currently aged 60 years
Member currently aged 45 years
2013
US
84
83
2013
US
86
85
UK
90
92
UK
89
91
NL
86
87
NL
89
89
2012
US
84
83
2012
US
86
85
UK
90
92
UK
89
91
NL
86
87
NL
89
89
29275_SAS_p097-137.indd 112
10/03/2014 12:57
Reed Elsevier Annual Reports and Financial Statements 2013
113
5 Pension schemes continued
The amount recognised in the statement of financial position in respect of defined benefit pension schemes at the start and end of the
year and the movements during the year were as follows:
Defined benefit obligation
At start of year
Service cost
Settlement, past service and curtailment
credits
Interest on pension scheme liabilities
Actuarial (loss)/gain on financial
assumptions
Actuarial (loss)/gain arising from
experience assumptions
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
Fair value of scheme assets
At start of year
Interest income on plan assets
Return on assets excluding amounts
included in interest income
Contributions by employer
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
UK
£m
(2,654)
(29)
–
(122)
(173)
8
(6)
94
–
(2,882)
2,516
116
111
36
6
(94)
–
2,691
US
£m
(922)
(29)
51
(41)
86
(10)
–
93
10
(762)
710
32
4
33
–
(93)
(10)
676
8
(25)
18
(3)
(5)
19
(17)
(716)
580
21
(1)
14
5
(19)
14
614
2013
NL
£m
Total
£m
UK
£m
(696)
(15)
(4,272)
(73)
59
(188)
(2,479)
(27)
1
(124)
Restated
2012
US
£m
(858)
(28)
19
(44)
NL
£m
(539)
(8)
–
(30)
Total
£m
(3,876)
(63)
20
(198)
(69)
(92)
(145)
(145)
(382)
(5)
(11)
206
(7)
(4,360)
3,806
169
114
83
11
(206)
4
3,981
(15)
(7)
89
–
(2,654)
2,371
119
45
63
7
(89)
–
2,516
(18)
–
112
40
(922)
726
37
53
38
–
(112)
(32)
710
1
(4)
15
14
(696)
537
31
23
15
4
(15)
(15)
580
(32)
(11)
216
54
(4,272)
3,634
187
121
116
11
(216)
(47)
3,806
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Net defined benefit obligation
(191)
(86)
(102)
(379)
(138)
(212)
(116)
(466)
* included in benefits paid are settlements of £52m (2012: £75m).
As at 31 December 2013 the defined benefit obligations comprise £4,200m (2012: £4,112m) in relation to funded schemes and £160m
(2012: £160m) in relation to unfunded schemes.
The weighted average duration of defined benefit scheme liabilities for 2013 and 2012 is 19 years in the UK, 16 years in the US and
21 years in the Netherlands. Deferred tax assets of £104m (2012: £153m) are recognised in respect of the pension scheme deficits.
G
o
v
e
r
n
a
n
c
e
Amounts recognised in the statement of comprehensive income are set out below:
Gains and losses arising during the year:
Experience losses on scheme liabilities
Experience gains on scheme assets
Actuarial gains /(losses) arising on the present value of scheme liabilities due to changes in:
– discount rates
– inflation
– other actuarial assumptions
Net cumulative losses at start of year
Net cumulative losses at end of year
2013
£m
(5)
114
78
(171)
24
40
(515)
(475)
Restated
2012
£m
(32)
121
(552)
74
96
(293)
(222)
(515)
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 113
07/03/2014 11:25
114 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
5 Pension schemes continued
The major categories and fair values of scheme assets at the end of the reporting period are as follows:
FAIR VALUE OF SCHEME ASSETS
2013
2012
Equities
Government bonds
Corporate bonds
Cash
Other
Total
UK
£m
1,351
1,089
–
87
164
2,691
US
£m
174
68
411
4
19
676
NL
£m
222
358
–
–
34
614
Total
£m
1,747
1,515
411
91
217
3,981
UK
£m
1,207
1,088
–
106
115
2,516
US
£m
409
164
88
1
48
710
NL
£m
169
376
–
–
35
580
Total
£m
1,785
1,628
88
107
198
3,806
The actual return on scheme assets for the year ended 31 December 2013 was £283m (2012: £308m).
Assets and obligations associated with the schemes are sensitive to changes in the market values of assets and the market related
assumptions used to value scheme liabilities. In particular, adverse changes to asset values, discount rates or inflation could increase
future pension costs and funding requirements.
Typically Reed Elsevier’s schemes are exposed to: investment risks, whereby actual returns on plan assets may be below those rates
used to determine the defined benefit obligations and interest rate risks whereby scheme deficits may increase if bond yields in the UK,
US and the Netherlands decline and are not offset by returns in government and corporate bond portfolios. The schemes are also
exposed to other risks such as unanticipated future increases in: member mortality patterns; inflation; and future salaries, all
potentially leading to an increase in scheme liabilities (particularly in the Netherlands which is the only major scheme which remains
open to new members).
Investment policies of each scheme are intended to ensure continuous payment of defined benefit pensions in the short term and long
term. Efforts are made to limit risks on marketable securities by adopting investment policies that diversify assets across geographies
and among equities, government and corporate bonds and cash. Asset allocations are dependent on a variety of factors including the
duration of scheme liabilities and the statutory funded status of the plan.
All equities and government and corporate bonds have quoted prices in active markets. The majority of other assets are investments in
property funds which have quoted prices in active markets.
Sensitivity analysis
The valuation of Reed Elsevier’s pension scheme liabilities involves significant actuarial assumptions, being the life expectancy of
the members, inflation and the rate at which the future pension payments are discounted. Differences arising from actual experience
or future changes in assumptions may materially affect future pension charges. In particular, changes in assumptions for discount
rates, inflation and life expectancies that are reasonably possible would have the following approximate effects on the defined benefit
pension obligations:
Increase/decrease of 0.25% in discount rate:
Increase/decrease of 0.25% in the expected inflation rate:
Increase/decrease of one year in assumed life expectancy:
£m
191
113
108
The above analysis has been calculated on the same basis used to determine the defined benefit obligation recognised in the statement
of financial position. There has been no change in the methods used to prepare the analysis compared with prior years. This sensitivity
analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the above
assumptions would occur in isolation of one another as some of the assumptions may be correlated.
29275_SAS_p097-137.indd 114
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
115
6 Share based remuneration
Reed Elsevier provides a number of share based remuneration schemes to Directors and employees. The principal share based
remuneration schemes are the Executive Share Option Schemes (ESOS), the Long Term Incentive Plan (LTIP), the Reed Elsevier Growth
Plan (REGP), the Retention Share Plan (RSP) and the Bonus Investment Plan (BIP). Share options granted under ESOS and LTIP are
exercisable after three years and up to ten years from the date of grant at a price equivalent to the market value of the respective shares
at the date of grant. Conditional shares granted under ESOS, LTIP, RSP and BIP are exercisable after three years for nil consideration if
conditions are met. Conditional shares granted under REGP are exercisable for nil consideration if conditions are met after three and
five years. Other awards principally relate to all employee share based saving schemes in the UK and the Netherlands.
Share based remuneration awards are, other than upon retirement or in exceptional circumstances, subject to the condition that the
employee remains in employment at the time of exercise.
Conditional shares granted under LTIP, REGP, RSP and BIP between 2010 and 2013 are subject to the achievement of growth targets of
Reed Elsevier PLC and Reed Elsevier NV adjusted earnings per share measured at constant exchange rates as well as the achievement
of a targeted percentage return on invested capital of Reed Elsevier PLC and Reed Elsevier NV. LTIP grants in 2011, 2012 and 2013 and
REGP grants are also variable subject to the achievement of a total shareholder return performance target.
The weighted average fair value per award is based on full vesting on achievement of non market related performance conditions and
stochastic models for market related components. The conditional shares and option awards are recognised in the income statement
over the vesting period, being between three and five years, on the basis of expected performance against the non market related
conditions, with the fair value related to market related components unchanging. Further details of performance conditions are given in
the Directors’ Remuneration Report on pages 78 to 94.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
2013 GRANTS
Share options
– ESOS
– Other
Total share options
Conditional shares
– ESOS
– LTIP
– RSP
– REGP
– BIP
Total conditional shares
2012 GRANTS
Share options
– ESOS
– Other
Total share options
Conditional shares
– ESOS
– LTIP
– RSP
– BIP
Total conditional shares
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Weighted
average fair
value per
award
£
Weighted
average fair
value per
award
£
Number of
shares
’000
Number of
shares
’000
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
1,521
645
2,166
524
1,338
10
322
987
3,181
1.12
1.29
1.17
6.51
6.14
7.35
6.49
7.40
6.63
1,058
257
1,315
365
930
7
450
615
2,367
1.52
1.10
1.44
9.28
8.90
10.65
9.34
10.69
9.51
G
o
v
e
r
n
a
n
c
e
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Weighted
average fair
value per
award
£
Weighted
average fair
value per
award
£
Number of
shares
’000
Number of
shares
’000
1,801
702
2,503
797
1,807
256
1,542
4,402
0.90
1.04
0.94
4.60
4.45
6.00
5.20
4.83
1,263
293
1,556
560
1,144
5
696
2,405
1.20
0.95
1.15
6.41
6.13
7.82
7.41
6.57
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 115
07/03/2014 11:25
116 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
6 Share based remuneration continued
The main assumptions used to determine the fair values, which have been established with advice from and data provided by
independent actuaries, are set out below:
ASSUMPTIONS FOR GRANTS MADE DURING THE YEAR
Weighted average share price at date of grant
– ESOS
– LTIP
– RSP
– BIP
– REGP
– Other
Expected share price volatility
Expected option life
Expected dividend yield
Risk free interest rate
Expected lapse rate
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
2013
2012
2013
2012
£7.35
£7.35
£7.35
£7.39
£7.76
£7.45
28%
4 years
4.1%
0.5%
2-5%
£5.19
£5.25
£6.00
£5.20
£5.49
30%
4 years
3.9%
0.8%
2-5%
€12.53
€12.54
€12.53
€12.53
€13.15
€11.89
28%
4 years
4.7%
0.4%
2-4%
€9.07
€8.91
€9.65
€9.15
€9.63
30%
4 years
4.5%
0.9%
2-4%
Expected share price volatility has been estimated based on relevant historic data in respect of the Reed Elsevier PLC and Reed Elsevier
NV ordinary share prices. Expected share option life has been estimated based on historical exercise patterns in respect of Reed
Elsevier PLC and Reed Elsevier NV share options.
The share based remuneration awards outstanding as at 31 December 2013, in respect of both Reed Elsevier PLC and Reed Elsevier NV
ordinary shares, are set out below:
SHARE OPTIONS
Outstanding at 1 January 2012
Granted
Exercised
Forfeited
Expired
Outstanding at 1 January 2013
Granted
Exercised
Forfeited
Expired
Outstanding at 31 December 2013
Exercisable at 31 December 2012
Exercisable at 31 December 2013
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Number of
shares under
option
’000
29,540
2,503
(6,694)
(1,022)
(4,992)
Weighted
average
exercise
price
(pence)
534
497
497
498
592
Number of
shares under
option
’000
21,641
1,556
(1,913)
(581)
(5,121)
19,335
2,166
(9,102)
(112)
(560)
11,727
12,573
5,150
529
694
542
535
537
549
553
537
15,582
1,315
(7,628)
(167)
(462)
8,640
12,329
5,535
Weighted
average
exercise
price
(€)
10.99
9.19
9.36
9.33
12.34
10.63
12.41
10.72
11.30
11.30
10.77
11.12
11.09
29275_SAS_p097-137.indd 116
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
117
6 Share based remuneration continued
CONDITIONAL SHARES
Outstanding at 1 January 2012
Granted
Vested
Forfeited/lapsed
Outstanding at 1 January 2013
Granted
Vested
Forfeited/lapsed
Outstanding at 31 December 2013
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
In respect of
Reed Elsevier PLC
ordinary shares
In respect of
Reed Elsevier NV
ordinary shares
Number of shares
’000
Number of shares
’000
13,896
4,402
(601)
(5,885)
11,812
3,181
(3,256)
(1,395)
10,342
8,267
2,405
(391)
(3,575)
6,706
2,367
(1,966)
(923)
6,184
The weighted average share price at the date of exercise of share options and vesting of conditional shares during 2013 was 761p
(2012: 593p) for Reed Elsevier PLC ordinary shares and €13.15 (2012: €10.43) for Reed Elsevier NV ordinary shares.
RANGE OF EXERCISE PRICES FOR OUTSTANDING SHARE OPTIONS
2013
2012
Reed Elsevier PLC ordinary shares (pence)
401-450
451-500
501-550
551-600
601-650
701-750
801-850
851-900
901-950
Total
Reed Elsevier NV ordinary shares (euro)
7.01-8.00
8.01-9.00
9.01-10.00
10.01-11.00
11.01-12.00
12.01-13.00
13.01-14.00
14.01-15.00
15.01-16.00
Total
Weighted
average
remaining
period until
expiry
(years)
Number of
shares under
option
’000
Number of
shares under
option
’000
Weighted
average
remaining
period until
expiry
(years)
1,772
1,161
5,284
695
1,338
1,462
10
2
3
11,727
41
1,834
1,813
619
1,670
1,864
134
663
2
8,640
1.9
4.2
5.6
3.9
4.0
9.4
9.6
9.9
9.0
5.1
5.0
6.8
7.2
1.4
2.3
7.1
4.7
3.1
9.9
5.4
1,925
4,415
8,981
189
3,825
–
–
–
–
19,335
58
2,736
3,142
2,697
3,982
1,806
118
1,043
–
15,582
2.8
3.5
5.7
5.4
4.8
–
–
–
–
4.7
6.1
7.7
6.9
1.6
2.6
5.1
4.1
4.1
–
4.6
Share options are expected, upon exercise, to be met principally by the issue of new ordinary shares but may also be met from shares held
by the Reed Elsevier Group plc Employee Benefit Trust (EBT) (see note 27). Conditional shares will be met from shares held by the EBT.
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 117
07/03/2014 11:25
118 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
7 Net finance costs
Interest on short term bank loans, overdrafts and commercial paper
Interest on term debt
Interest on obligations under finance leases
Total borrowing costs
Losses on loans and derivatives not designated as hedges
Net financing charge on defined benefit pension schemes
Finance costs
Interest on bank deposits
Gains on loans and derivatives not designated as hedges
Finance income
Net finance costs
2013
£m
(11)
(168)
(1)
(180)
(7)
(19)
(206)
4
6
10
(196)
Restated
2012
£m
(27)
(196)
(1)
(224)
(8)
(11)
(243)
7
9
16
(227)
Finance costs include £3m (2012: £16m) transferred from the hedge reserve. A net gain of £1m (2012: £2m loss) on interest rate
derivatives designated as cash flow hedges was recognised directly in equity in the hedge reserve to be recognised in future periods.
8 Disposals and other non operating items
Revaluation of held for trading investments
Property provisions on disposed businesses
Gain on disposal of businesses and assets held for sale
Net gains on disposals and other non operating items
9 Taxation
Current tax
United Kingdom
The Netherlands
Rest of world
Total current tax charge
Deferred tax
Tax expense
2013
£m
5
–
11
16
2013
£m
(50)
(80)
(222)
(352)
271
(81)
2012
£m
19
(60)
86
45
Restated
2012
£m
(73)
(68)
(12)
(153)
51
(102)
The increase in the deferred tax credit in 2013 principally relates to the alignment of certain business assets with their global
management structure. It does not affect cash tax paid of £362m in 2013. The decrease in UK current tax in 2013 reflects the settlement
of prior year tax matters.
29275_SAS_p097-137.indd 118
07/03/2014 11:25
Reed Elsevier Annual Reports and Financial Statements 2013
119
9 Taxation continued
The net tax expense charged on profit before tax differs from the theoretical amount that would arise using the weighted average of tax rates
applicable to accounting profits and losses of the consolidated entities, as follows:
Profit before tax
Tax at average applicable rates
Tax on share of results of joint ventures
Expenses not deductible for tax purposes and US state taxes
Non-taxable costs of share based remuneration
(Non-deductible)/non-taxable disposal related gains and losses
Tax losses of the period not recognised
Recognition and utilisation of tax losses that arose in prior years
Exceptional prior year tax credit
Deferred tax credit on the alignment of business assets
Other adjustments in respect of prior periods
Deferred tax effect of changes in tax rates
Tax expense
2013
£m
1,196
(280)
10
(38)
3
(22)
(4)
9
–
221
24
(4)
(81)
Restated
2012
£m
1,151
(244)
7
(30)
3
69
(6)
6
96
–
(2)
(1)
(102)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
The weighted average applicable tax rate for the year was 23% (2012 restated: 21%). This increase is caused by a change in the relative
profitability of Reed Elsevier entities in the countries in which they operate, partially offset by the impact of the reduction in the tax rate of the
United Kingdom (see below).
During 2013, Reed Elsevier aligned certain business assets with their global management structure. As a result of this alignment the tax
deductible value of these assets was updated to market value. As at 31 December 2013, Reed Elsevier has recognised a deferred tax credit
of £221m in respect of these assets, which has been excluded from adjusted earnings.
During 2012, Reed Elsevier resolved a number of significant prior year tax matters and reassessed its exposure to other tax matters across
the jurisdictions in which Reed Elsevier operates. As a result of this reassessment, current tax liabilities were reduced by £96m to reflect the
lower cash tax expected to be payable.
The following tax has been recognised directly in equity during the year:
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Tax on items that will not be reclassified to profit or loss
Tax on actuarial movements on defined benefit pensions schemes
Tax credit on other items
Tax on items that may be reclassified to profit or loss
Tax on fair value movements on cash flow hedges
Net tax (debit)/credit recognised in other comprehensive income
Tax credit on share based remuneration recognised directly in equity
G
o
v
e
r
n
a
n
c
e
2013
£m
(24)
–
(24)
(15)
(15)
(39)
20
Restated
2012
£m
91
5
96
(19)
(19)
77
–
A number of changes to the UK corporation tax system, including reductions of the main rate of corporation tax from 23% to 21% with effect
from 1 April 2014, and from 21% to 20% with effect from 1 April 2015, were substantively enacted on 2 July 2013. Reed Elsevier has therefore
remeasured its UK deferred tax assets and liabilities at the end of the reporting period at 20%, which has resulted in recognition of a deferred
tax debit of £4m in the income statement.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 119
07/03/2014 11:26
120 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
10 Adjusted figures
Reed Elsevier uses adjusted figures as additional performance measures. Adjusted operating profit excludes amortisation of acquired
intangible assets, acquisition related costs and the share of taxes in joint ventures. Acquisition related costs relate to acquisition
integration, transaction related fees, and those elements of deferred and contingent consideration required to be expensed under IFRS.
Adjusted profit before tax also excludes disposal related and other non operating items and the net financing charge or credit on defined
benefit pension schemes. The adjusted tax charge excludes the tax effect of these adjusting items, exceptional tax credits (in 2012 only)
and movements on deferred tax assets and liabilities related to goodwill and acquired intangible assets. It includes the benefit of tax
amortisation where available on goodwill and acquired intangible assets. Adjusted operating cash flow is measured after net capital
expenditure and dividends from joint ventures, but before payments in relation to prior year exceptional restructuring programmes and
acquisition related costs. Adjusted figures are derived as follows:
Operating profit
Adjustments:
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Adjusted operating profit
Profit before tax
Adjustments:
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Adjusted profit before tax
Tax charge
Adjustments:
Deferred tax movements on goodwill and acquired intangible assets
Tax on acquisition related costs
Reclassification of tax in joint ventures
Tax on net financing charge on defined benefit pension schemes
Tax on disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Adjusted tax charge
Net profit attributable to parent companies’ shareholders
Adjustments (post tax):
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Adjusted net profit attributable to parent companies’ shareholders
Cash generated from operations
Dividends received from joint ventures
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Expenditure on internally developed intangible assets
Payments in relation to exceptional restructuring costs
Payments in relation to acquisition related costs
Adjusted operating cash flow
2013
£m
Restated
2012
£m
1,376
1,333
318
43
12
1,749
329
21
5
1,688
1,196
1,151
318
43
12
19
(16)
1,572
329
21
5
11
(45)
1,472
(81)
(102)
7
(12)
(12)
(6)
34
(300)
–
(370)
7
(5)
(5)
(3)
(58)
(84)
(96)
(346)
1,110
1,044
325
31
13
18
(300)
–
1,197
1,943
22
(57)
6
(251)
12
28
1,703
336
16
8
(103)
(84)
(96)
1,121
1,847
20
(70)
7
(263)
25
37
1,603
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
29275_SAS_p097-137.indd 120
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
121
11 Statement of cash flows
RECONCILIATION OF OPERATING PROFIT BEFORE JOINT VENTURES TO CASH GENERATED FROM OPERATIONS
Operating profit before joint ventures
Amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Share based remuneration
Total non cash items
Decrease in inventories and pre-publication costs
Decrease in receivables
Decrease in payables
Increase in working capital
Cash generated from operations
CASH FLOW ON ACQUISITIONS
Purchase of businesses
Investment in joint ventures
Deferred payments relating to prior year acquisitions
Total
RECONCILIATION OF NET BORROWINGS
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
2013
£m
Restated
2012
£m
1,347
1,309
317
160
89
31
597
10
5
(16)
(1)
1,943
2013
£m
(194)
(6)
(21)
(221)
328
151
76
31
586
21
4
(73)
(48)
1,847
2012
£m
(276)
(10)
(30)
(316)
Note
12
Cash and
cash
equivalents
£m
Borrowings
£m
Related
derivative
financial
instruments
£m
2013
£m
2012
£m
At start of year
641
(3,892)
124
(3,127)
(3,433)
Decrease in cash and cash equivalents
Net movement in short term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Change in net borrowings resulting from cash flows
Inception of finance leases
Fair value and other adjustments to borrowings and related derivatives
Exchange translation differences
At end of year
(532)
–
–
–
–
(532)
–
–
23
132
–
(155)
(184)
915
10
586
(12)
32
5
(3,281)
–
(14)
–
–
–
(14)
–
(33)
–
77
(532)
(169)
(184)
915
10
40
(12)
(1)
28
(3,072)
(72)
434
(592)
437
4
211
(13)
1
107
(3,127)
G
o
v
e
r
n
a
n
c
e
Net borrowings comprise cash and cash equivalents, loan capital, finance leases, promissory notes, bank and other loans, derivative
financial instruments that are used to hedge the fair value of fixed rate borrowings, and payable/receivable balances in respect of cash
collateral received/paid.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 121
07/03/2014 11:26
122 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
12 Acquisitions
During the year a number of acquisitions were made for a total consideration of £239m (2012: £341m), after taking account of net cash
acquired of £14m (2012: £12m). The net assets of the businesses acquired are incorporated at their fair value to the combined
businesses. Provisional fair values of the consideration given and of the assets and liabilities acquired are summarised below:
Goodwill
Intangible assets
Property, plant & equipment
Current assets
Current liabilities
Borrowings
Current tax
Deferred tax
Net assets acquired
Consideration (after taking account of £14m (2012: £12m) net cash acquired)
Less: consideration deferred to future years
Less: acquisition date fair value of equity interest
Net cash flow
Fair
value
2013
£m
157
133
–
9
(21)
–
–
(39)
239
239
(36)
(9)
194
Fair
value
2012
£m
165
229
1
21
(61)
–
2
(16)
341
341
(23)
(42)
276
Goodwill, being the excess of the consideration over the net tangible and intangible assets acquired, represents benefits which do not
qualify for recognition as intangible assets, including the ability of a business to generate higher returns than individual assets, skilled
workforces, acquisition synergies that are specific to Reed Elsevier, and high barriers to market entry. In addition, goodwill arises on the
recognition of deferred tax liabilities in respect of intangible assets for which amortisation does not qualify for tax deductions.
The fair values of the assets and liabilities acquired are provisional pending the completion of the valuation exercises. Final fair values
will be incorporated in the 2014 combined financial statements. There were no significant adjustments to the provisional fair values of
prior year acquisitions established in 2012.
The businesses acquired in 2013 contributed £27m to revenue, increased adjusted operating profit by £8m, increased adjusted net profit
by £8m, decreased net profit by £1m, and contributed a net cash outflow of £3m from operating activities for the part year under Reed
Elsevier ownership and before taking account of acquisition financing costs. Had the businesses been acquired at the beginning of the
year, on a pro forma basis the Reed Elsevier revenues, adjusted operating profit, adjusted net profit attributable to parent companies’
shareholders and net profit attributable to parent companies’ shareholders for the year would have been £6,067m, £1,751m, £1,199m
and £1,112m respectively before taking account of acquisition financing costs.
13 Equity dividends
ORDINARY DIVIDENDS DECLARED IN THE YEAR
Reed Elsevier PLC
Reed Elsevier NV
Total
2013
£m
278
273
551
2012
£m
264
259
523
Ordinary dividends declared in the year, in amounts per ordinary share, comprise: a 2012 final dividend of 17p and a 2013 interim dividend
of 6.65p giving a total of 23.65p (2012: 21.9p) for Reed Elsevier PLC; and a 2012 final dividend of €0.337 and a 2013 interim dividend of
€0.132 giving a total of €0.469 (2012: €0.456) for Reed Elsevier NV.
The directors of Reed Elsevier PLC have proposed a final dividend of 17.95p (2012: 17p). The directors of Reed Elsevier NV have proposed
a final dividend of €0.374 (2012: €0.337). The total cost of funding the proposed final dividends is expected to be £422m, for which no
liability has been recognised at the statement of financial position date.
29275_SAS_p097-137.indd 122
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
123
13 Equity dividends continued
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Reed Elsevier PLC
Reed Elsevier NV
Total
2013
£m
286
291
577
2012
£m
273
262
535
Dividends paid to Reed Elsevier PLC and Reed Elsevier NV shareholders are, other than in special circumstances, equalised at the gross
level inclusive of the UK tax credit of 10% received by certain Reed Elsevier PLC shareholders. The cost of funding the Reed Elsevier PLC
dividends is therefore similar to that of Reed Elsevier NV.
14 Goodwill
At start of year
Acquisitions
Disposals/reclassified as held for sale
Exchange translation differences
At end of year
2013
£m
4,545
157
(46)
(80)
4,576
2012
£m
4,729
165
(152)
(197)
4,545
The carrying amount of goodwill is after cumulative amortisation of £1,154m (2012: £1,180m) which was charged prior to the adoption of
IFRS and £9m (2012: £20m) of subsequent impairment charges recorded in prior years.
Impairment review
Impairment testing of goodwill and indefinite lived intangible assets is performed at least annually based on cash generating units
(CGUs). A CGU is the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows
from other groups of assets. Goodwill impairment testing is performed on the basis of 25 CGUs (2012: 22 CGUs). CGUs which are not
individually significant have been aggregated for presentation purposes. Typically, acquisitions are fully integrated into existing
business units, and the goodwill arising is allocated to the CGUs, or groups of CGUs that are expected to benefit from the synergies
of the acquisition.
The carrying value of goodwill recorded in the major groups of CGUs is set out below:
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
GOODWILL
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Total
G
o
v
e
r
n
a
n
c
e
2013
£m
1,051
1,604
374
1,121
426
4,576
2012
£m
1,026
1,559
408
1,150
402
4,545
Reed Elsevier’s goodwill impairment testing methodology, assumptions and sensitivity analysis are disclosed within critical judgements
and key sources of estimation uncertainty on pages 105 and 106.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 123
07/03/2014 11:26
124 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
15 Intangible assets
Cost
At 1 January 2012
Acquisitions
Additions
Disposals/reclassified as held for sale
Exchange translation differences
At 1 January 2013
Acquisitions
Additions
Disposals/reclassified as held for sale
Exchange translation differences
At 31 December 2013
Accumulated amortisation
At 1 January 2012
Charge for the year
Disposals/reclassified as held for sale
Exchange translation differences
At 1 January 2013
Charge for the year
Disposals/reclassified as held for sale
Exchange translation differences
At 31 December 2013
Net book amount
At 31 December 2012
At 31 December 2013
Market and
customer
related
£m
Content,
software
and other
£m
Total
acquired
intangible
assets
£m
Internally
developed
intangible
assets
£m
2,802
201
–
(56)
(131)
2,816
49
–
(55)
(65)
2,745
744
173
(11)
(36)
870
178
(55)
(26)
967
3,263
27
–
(97)
(103)
3,090
84
–
(216)
(16)
2,942
2,422
155
(89)
(80)
2,408
139
(216)
(15)
2,316
6,065
228
–
(153)
(234)
5,906
133
–
(271)
(81)
5,687
3,166
328
(100)
(116)
3,278
317
(271)
(41)
3,283
1,422
1
261
(114)
(53)
1,517
–
251
(27)
(24)
1,717
827
151
(79)
(29)
870
160
(22)
(11)
997
Total
£m
7,487
229
261
(267)
(287)
7,423
133
251
(298)
(105)
7,404
3,993
479
(179)
(145)
4,148
477
(293)
(52)
4,280
1,946
1,778
682
626
2,628
2,404
647
720
3,275
3,124
Intangible assets acquired as part of business combinations comprise: market related assets (e.g. trademarks, imprints, brands);
customer related assets (e.g. subscription bases, customer lists, customer relationships); and content, software and other intangible
assets (e.g. editorial content, software and product delivery systems, other publishing rights, exhibition rights and supply contracts).
Included in content, software and other acquired intangible assets are assets with a net book value of £353m (2012: £431m) that arose on
acquisitions completed prior to the adoption of IFRS that have not been allocated to specific categories of intangible assets. Internally
developed intangible assets typically comprise software and systems development where an identifiable asset is created that is
probable to generate future economic benefits.
Included in market and customer related intangible assets are £347m (2012: £354m) of brands and imprints relating to Scientific,
Technical & Medical determined to have indefinite lives based on an assessment of their historical longevity and stable market positions.
Indefinite lived intangibles are tested for impairment at least annually using the same value in use assumptions as set out in critical
judgements and key sources of estimation uncertainty on pages 105 and 106.
Also included in market and customer related intangible assets are £952m (2012: £1,037m) of customer relationship assets arising on
the acquisition of ChoicePoint in 2008 with a remaining useful economic life of approximately 15 years.
29275_SAS_p097-137.indd 124
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
125
16 Investments
Investments in joint ventures
Available for sale investments
Venture capital investments held for trading
Total
2013
£m
125
2
90
217
The value of venture capital investments held for trading, determined by reference to quoted market prices, amounted to £12m
(2012: £27m). The value of other venture capital investments and available for sale investments has been determined by reference
to other observable market inputs.
An analysis of changes in the carrying value of investments in joint ventures is set out below:
At start of year
Share of results of joint ventures
Dividends received from joint ventures
Disposals and transfers
Additions
Exchange translation differences
At end of year
2013
£m
100
29
(22)
(3)
21
–
125
2012
£m
100
3
76
179
2012
£m
124
24
(20)
(33)
10
(5)
100
The principal joint ventures at 31 December 2013 are exhibition joint ventures within Exhibitions and Giuffrè and Martindale within Legal.
Summarised aggregate information in respect of joint ventures and Reed Elsevier’s share is set out below:
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Revenue
Net profit for the year
Total assets
Total liabilities
Net assets
Goodwill
Total
Total joint ventures
Reed Elsevier share
2013
£m
225
57
246
(134)
112
2012
£m
187
45
227
(126)
101
2013
£m
110
29
117
(64)
53
72
125
2012
£m
91
24
104
(59)
45
55
100
G
o
v
e
r
n
a
n
c
e
Reed Elsevier’s combined other comprehensive income includes nil (2012: nil) relating to joint ventures.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 125
07/03/2014 11:26
126 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
17 Property, plant and equipment
Cost
At start of year
Acquisitions
Capital expenditure
Disposals/reclassified as held for sale
Exchange translation differences
At end of year
Accumulated depreciation
At start of year
Disposals/reclassified as held for sale
Charge for the year
Exchange translation differences
At end of year
2013
Land and
buildings
£m
Fixtures and
equipment
£m
218
–
4
(8)
(4)
210
116
(6)
9
(2)
117
537
–
66
(34)
(11)
558
375
(32)
80
(9)
414
2012
Land and
buildings
£m
Fixtures and
equipment
£m
238
–
10
(21)
(9)
218
118
(5)
8
(5)
116
582
1
70
(97)
(19)
537
414
(94)
68
(13)
375
Total
£m
755
–
70
(42)
(15)
768
491
(38)
89
(11)
531
Total
£m
820
1
80
(118)
(28)
755
532
(99)
76
(18)
491
Net book amount
93
144
237
102
162
264
No depreciation is provided on freehold land of £14m (2012: £15m). The net book amount of property, plant and equipment at
31 December 2013 includes £17m (2012: £11m) in respect of assets held under finance leases relating to fixtures and equipment.
18 Financial instruments
Details of the objectives, policies and strategies pursued by Reed Elsevier in relation to financial instruments and capital management
are set out on pages 58 and 59 of the Financial Review. The main financial risks faced by Reed Elsevier are liquidity risk, market risk –
comprising interest rate risk and foreign exchange risk – and credit risk. Financial instruments are used to finance the Reed Elsevier
businesses and to hedge interest rate and foreign exchange risks. Reed Elsevier’s businesses do not enter into speculative derivative
transactions. Details of financial instruments subject to liquidity, market and credit risks are described below.
Liquidity risk
Reed Elsevier maintains a range of borrowing facilities and debt programmes to fund its requirements, at short notice and at
competitive rates. The remaining contractual maturities for borrowings and derivative financial instruments are shown in the table
below. The table shows undiscounted principal and interest cash flows and includes contractual gross cash flows to be exchanged as
part of cross currency interest rate swaps and forward foreign exchange contracts where there is a legal right of set-off.
At 31 December 2013
Borrowings
Fixed rate borrowings
Floating rate borrowings
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
Forward foreign exchange contracts
Derivative financial assets
Interest rate derivatives
Cross currency interest rate swaps
Forward foreign exchange contracts
Total
Carrying
amount
£m
(2,931)
(350)
Within
1 year
£m
(497)
(288)
(4)
(6)
(7)
–
(180)
(1,031)
19
70
99
(3,110)
13
247
1,082
(654)
Contractual cash flow
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
Total
£m
(243)
(61)
(524)
–
(420)
(1)
(264)
–
(1,909)
(2)
(3,857)
(352)
–
(3)
(402)
11
2
431
(265)
–
(5)
(222)
6
2
233
(510)
(1)
(7)
–
1
3
–
(425)
(4)
(193)
–
–
189
–
(272)
(7)
–
–
(12)
(388)
(1,655)
–
–
–
(1,918)
31
443
1,746
(4,044)
29275_SAS_p097-137.indd 126
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
127
18 Financial instruments continued
At 31 December 2012
Borrowings
Fixed rate borrowings
Floating rate borrowings
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
Forward foreign exchange contracts
Derivative financial assets
Interest rate derivatives
Cross currency interest rate swaps
Forward foreign exchange contracts
Total
Carrying
amount
£m
(3,695)
(197)
Within
1 year
£m
(803)
(132)
(2)
–
(9)
(3)
(166)
(1,382)
47
93
55
(3,708)
35
202
1,400
(849)
Contractual cash flow
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
Total
£m
(797)
(1)
–
(180)
(442)
13
243
460
(704)
(251)
(63)
–
–
(194)
12
–
202
(294)
(530)
–
(428)
(1)
(1,940)
(3)
(4,749)
(200)
–
–
–
9
–
–
(521)
–
–
–
(5)
–
–
(8)
(346)
(2,018)
6
–
–
(423)
–
–
–
(1,948)
75
445
2,062
(4,739)
The carrying amount of derivative financial liabilities comprises £10m (2012: nil) in relation to fair value hedges, £7m (2012: £7m) in
relation to cash flow hedges and nil (2012: £4m) not designated as hedging instruments. The carrying amount of derivative financial
assets comprises £84m (2012: £124m) in relation to fair value hedges, £88m (2012: £46m) in relation to cash flow hedges and £29m
(2012: £25m) not designated as hedging instruments, less £13m (2012: nil) of cash collateral received from swap counterparties which
has been offset against the related derivative financial assets (see ‘Credit risk’ below). The expected cash flows in respect of the cash
collateral have been included in the tables above together with the cash flows for the related cross currency interest rate swaps.
At 31 December 2013, Reed Elsevier had access to a $2,000m committed bank facility maturing in July 2018, which was undrawn.
The bank facility, together with certain private placements, are subject to financial covenants typical to Reed Elsevier’s size and financial
strength. Reed Elsevier had significant headroom within these covenants for the year ended 31 December 2013. There are no financial
covenants in any outstanding public bonds.
After taking account of the maturity of committed bank facilities that back short term borrowings at 31 December 2013, and after utilising
available cash resources, no borrowings mature within two years (2012: nil), no borrowings mature in the third year (2012: 27%), 50% in
the fourth and fifth years (2012: 23%), 42% in the sixth to tenth years (2012: 39%), and 8% beyond the tenth year (2012: 11%).
Market risk
Reed Elsevier’s primary market risks are to interest rate fluctuations and exchange rate movements. Derivatives are used to hedge or
reduce the risks of interest rate and exchange rate movements and are not entered into unless such risks exist. Derivatives used by
Reed Elsevier for hedging a particular risk are not specialised and are generally available from numerous sources. The impact of
market risks on net post employment benefit obligations and taxation is excluded from the following market risk sensitivity analysis.
Interest rate risk
Reed Elsevier’s interest rate exposure management policy is aimed at reducing the exposure of the combined businesses to changes in
interest rates.
At 31 December 2013, 57% of gross borrowings were either fixed rate or had been fixed through the use of interest rate swaps, forward
rate agreements and options. A 100 basis point reduction in interest rates would result in an estimated decrease in net finance costs of
£12m (2012: £8m), based on the composition of financial instruments including cash, cash equivalents, bank loans and commercial
paper borrowings at 31 December 2013. A 100 basis point rise in interest rates would result in an estimated increase in net finance costs
of £12m (2012: £8m).
The impact on net equity of a theoretical change in interest rates as at 31 December 2013 is restricted to the change in carrying value of
floating rate to fixed rate interest rate derivatives in a designated cash flow hedge relationship and undesignated interest rate
derivatives. A 100 basis point reduction in interest rates would result in an estimated reduction in net equity of nil (2012: £1m) and a
100 basis point increase in interest rates would increase net equity by an estimated £1m (2012: £2m). The impact of a change in interest
rates on the carrying value of fixed rate borrowings in a designated fair value hedge relationship would be offset by the change in
carrying value of the related interest rate derivative. Fixed rate borrowings not in a designated hedging relationship are carried at
amortised cost.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 127
07/03/2014 11:26
128 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
18 Financial instruments continued
Foreign exchange rate risk
Translation exposures arise on the earnings and net assets of business operations in countries with currencies other than sterling, most
particularly in respect of the US businesses. Some of these exposures are offset by denominating borrowings in US dollars (see note 24).
A theoretical weakening of all currencies by 10% against sterling at 31 December 2013 would decrease the carrying value of net assets,
excluding net borrowings, by £500m (2012: £495m). This would be offset to a degree by a decrease in net borrowings of £246m (2012:
£286m). A strengthening of all currencies by 10% against sterling at 31 December 2013 would increase the carrying value of net assets,
excluding net borrowings, by £500m (2012: £495m) and increase net borrowings by £246m (2012: £286).
A retranslation of the combined businesses’ net profit for the year assuming a 10% weakening of all foreign currencies against sterling
but excluding transactional exposures would reduce net profit by £92m (2012: £80m). A 10% strengthening of all foreign currencies
against sterling on this basis would increase net profit for the year by £92m (2012: £80m).
Credit risk
Reed Elsevier seeks to limit interest rate and foreign exchange risks described above by the use of financial instruments and as a result
has a credit risk from the potential non performance by the counterparties to these financial instruments, which are unsecured.
The amount of this credit risk is normally restricted to the amounts of any hedge gain and not the principal amount being hedged.
Reed Elsevier also has a credit exposure to counterparties for the full principal amount of cash and cash equivalents. Credit risks are
controlled by monitoring the credit quality of these counterparties, principally licensed commercial banks and investment banks with
strong long term credit ratings, and the amounts outstanding with each of them.
In certain situations, Reed Elsevier enters into credit support arrangements with derivative counterparties to mitigate the credit
exposures arising from hedge gains on the related financial instruments. Under these arrangements, Reed Elsevier receives (or pays)
cash collateral equal to the mark to market valuation of the related derivative asset (or liability) on monthly settlement dates.
At 31 December 2013, £13m (2012: nil) of cash collateral had been received, and the resulting payable balance was offset against the
related derivative assets of £12m (2012: nil) in the statement of financial position.
Reed Elsevier has treasury policies in place which do not allow concentrations of risk with individual counterparties and do not allow
significant treasury exposures with counterparties which are rated lower than A-/A3 by Standard & Poor’s, Moody’s and Fitch.
Reed Elsevier also has credit risk with respect to trade receivables due from its customers that include national and state governments,
academic institutions and large and small enterprises including law firms, book stores and wholesalers. The concentration of credit
risk from trade receivables is limited due to the large and broad customer base. Trade receivable exposures are managed locally in the
business units where they arise. Where appropriate, business units seek to minimise this exposure by taking payment in advance and
through management of credit terms. Allowance is made for bad and doubtful debts based on management’s assessment of the risk
taking into account the ageing profile, experience and circumstance. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset, including derivative financial instruments, recorded in the statement of financial position.
Included within trade receivables are the following amounts which are past due but for which no allowance has been made. Past due up
to one month £156m (2012: £148m); past due two to three months £76m (2012: £58m); past due four to six months £26m (2012: £14m); and
past due greater than six months £7m (2012: £1m). Examples of trade receivables which are past due but for which no allowance has
been made include those receivables where there is no concern over the creditworthiness of the customer and where the history of
dealings with the customer indicate the amount will be settled.
29275_SAS_p097-137.indd 128
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
129
18 Financial instruments continued
Hedge accounting
The hedging relationships that are designated under IAS39 – Financial Instruments are described below:
Fair value hedges
Reed Elsevier has entered into interest rate swaps and cross currency interest rate swaps to hedge the exposure to changes in the fair
value of fixed rate borrowings due to interest rate and foreign currency movements which could affect the income statement. Interest
rate derivatives (including cross currency interest rate swaps) with a principal amount of £1,104m (2012: £1,502m) were in place at
31 December 2013 swapping fixed rate term debt issues denominated in US dollars (USD), sterling, euros and Swiss francs (CHF) to
floating rate USD, sterling, euro and USD debt respectively for the whole or part of their term.
The gains and losses on the borrowings and related derivatives designated as fair value hedges, which are included in the income
statement, for the two years ended 31 December 2013 were as follows:
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
GAINS/(LOSSES) ON BORROWINGS
AND RELATED DERIVATIVES
USD debt
Related interest rate swaps
GBP debt
Related interest rate swaps
EUR debt
Related interest rate swaps
CHF debt
Related CHF to USD cross
currency interest rate
swaps
1 January
2012
£m
–
–
–
Fair value
movement
gain/(loss)
£m
–
–
–
De-
designated
£m
–
–
–
Exchange
gain/(loss)
£m
–
–
–
1 January
2013
£m
–
–
–
(30)
30
–
(9)
9
–
(84)
84
–
(6)
6
–
(8)
8
–
–
–
–
–
–
–
9
(9)
–
–
–
–
9
(9)
–
–
–
–
–
–
–
4
(4)
–
4
(4)
–
(36)
36
–
(8)
8
–
(80)
80
–
(124)
124
–
Fair value
movement
gain/(loss)
£m
Exchange
gain/(loss)
£m
31 December
2013
£m
6
(6)
–
17
(17)
–
13
(13)
–
14
(14)
–
50
(50)
–
–
–
–
–
–
–
(1)
1
–
1
(1)
–
–
–
–
6
(6)
–
(19)
19
–
4
(4)
–
(65)
65
–
(74)
74
–
Total USD, GBP, EUR and CHF
debt
Total related interest rate
derivatives
Net gain
(123)
(14)
123
–
14
–
All fair value hedges were highly effective throughout the two years ended 31 December 2013.
Gross borrowings as at 31 December 2013 included £31m (2012: £37m) in relation to fair value adjustments to borrowings previously
designated in a fair value hedge relationship which were de-designated in 2008. The related derivatives were closed out on
de-designation with a cash inflow of £62m. £5m (2012: £5m) of these fair value adjustments were amortised in the year as a reduction
to finance costs.
Gross borrowings included nil (2012: £2m) in relation to fair value adjustments to borrowings previously designated in a fair value hedging
relationship which were de-designated during 2012. £2m (2012: £7m) of these fair value adjustments were amortised in the year as a
reduction to finance costs.
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 129
07/03/2014 11:26
130 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
18 Financial instruments continued
Cash flow hedges
Reed Elsevier enters into two types of cash flow hedge:
(1) Debt hedges comprising interest rate derivatives which fix the interest expense on a portion of forecast floating rate debt (including
commercial paper, short term bank loans and floating rate term debt), and cross currency interest rate derivatives which hedge the
cash flow exposure arising from foreign currency denominated debt.
(2) Revenue hedges comprising forward foreign exchange contracts which fix the exchange rate on a portion of future foreign currency
subscription revenues forecast by the Scientific, Technical & Medical businesses for up to 50 months.
Movements in the hedge reserve (pre-tax) in 2012 and 2013, including gains and losses on cash flow hedging instruments, were
as follows:
Hedge reserve at 1 January 2012: losses deferred
(Losses)/gains arising in 2012
Amounts recognised in income statement
Exchange translation differences
Hedge reserve at 1 January 2013: (losses)/gains deferred
Gains arising in 2013
Amounts recognised in income statement
Exchange translation differences
Hedge reserve at 31 December 2013: gains deferred
Debt
hedges
£m
Revenue
hedges
£m
Total hedge
reserve
pre-tax
£m
(17)
(2)
16
1
(2)
1
3
–
2
(46)
72
10
1
37
64
(6)
(1)
94
(63)
70
26
2
35
65
(3)
(1)
96
All cash flow hedges were highly effective throughout the two years ended 31 December 2013.
A tax charge of £23m (2012: £9m) in respect of the above gains and losses at 31 December 2013 was also deferred in the hedge reserve.
Of the amounts recognised in the income statement in the year, gains of £6m (2012: losses of £10m) were recognised in revenue, and
losses of £3m (2012: £16m) were recognised in finance costs. A tax charge of £1m (2012: credit of £5m) was recognised in relation to
these items.
The deferred gains and losses on cash flow hedges at 31 December 2013 are currently expected to be recognised in the income
statement in future years as follows:
2014
2015
2016
2017
2018
Gains deferred in hedge reserve at end of year
Debt
hedges
£m
(2)
(1)
–
–
5
2
Revenue
hedges
£m
38
37
17
2
–
94
Total hedge
reserve
pre-tax
£m
36
36
17
2
5
96
The cash flows for these hedges are expected to occur in line with the recognition of the gains and losses in the income statement, other
than in respect of certain forward foreign exchange hedges on subscriptions, where cash flows may be expected to occur in advance of
the subscription year.
29275_SAS_p097-137.indd 130
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
131
19 Deferred tax
Deferred tax assets
Deferred tax liabilities
Total
2013
£m
442
(1,076)
(634)
2012
£m
79
(919)
(840)
Movements in deferred tax liabilities and assets (before taking into consideration the offsetting of balances within the same jurisdiction)
are summarised as follows:
Deferred tax liabilities
Deferred tax assets
Excess of tax
allowances
over
amortisation
£m
Acquired
intangible
assets
£m
Other
temporary
differences
£m
Excess of
amortisation
over tax
allowances
£m
Tax losses
carried
forward
£m
Pensions
liabilities
£m
Other
temporary
differences
£m
Deferred tax (liability)/asset
at 1 January 2012
(Charge)/credit to profit
(Charge)/credit to equity/other
comprehensive income
Acquisitions
Disposals/reclassified as held for sale
Exchange translation differences
Deferred tax (liability)/asset
at 1 January 2013
(Charge)/credit to profit
(Charge)/credit to equity/other
comprehensive income
Acquisitions
Disposals/reclassified as held for sale
Exchange translation differences
Deferred tax (liability)/asset
at 31 December 2013
(231)
(5)
–
1
2
10
(223)
(138)
–
–
(3)
13
(900)
85
–
(10)
18
35
(772)
98
–
(39)
(18)
13
(105)
(9)
(3)
–
7
2
(108)
(106)
(6)
–
(9)
4
16
(3)
–
(3)
–
(1)
9
346
–
–
–
(6)
(351)
(718)
(225)
349
48
(19)
–
(2)
(1)
(3)
23
(8)
–
–
–
(1)
14
Total
£m
(1,024)
51
82
(16)
25
42
(840)
271
(18)
(39)
(30)
22
86
(21)
91
–
–
(3)
153
(26)
(24)
–
–
1
62
23
(6)
(2)
(1)
2
78
105
12
–
–
(2)
104
193
(634)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Other deferred tax liabilities includes temporary differences in respect of plant, property and equipment, capitalised development
spend and financial instruments. Other deferred tax assets includes temporary differences in respect of share based remuneration
and provisions.
Deferred tax assets in respect of tax losses and other deductible temporary differences have only been recognised to the extent that it is
more likely than not that sufficient taxable profits will be available to allow the asset to be recovered. Accordingly, no deferred tax asset
has been recognised in respect of unused trading losses of approximately £84m (2012: £129m) carried forward at year end. The deferred
tax asset not recognised in respect of these losses is approximately £20m (2012: £34m). Of the unrecognised losses, £56m (2012: £47m)
will expire if not utilised within 10 years, and £28m (2012: £82m) will expire after more than 10 years.
Deferred tax assets of approximately £14m (2012: £9m) have not been recognised in respect of tax losses and other temporary
differences carried forward of £69m (2012: £41m) which can only be used to offset future capital gains.
G
o
v
e
r
n
a
n
c
e
20 Inventories and pre-publication costs
Raw materials
Pre-publication costs
Finished goods
Total
2013
£m
3
90
49
142
2012
£m
3
101
55
159
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 131
07/03/2014 11:26
132 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
21 Trade and other receivables
Trade receivables
Allowance for doubtful debts
Prepayments and accrued income
Total
2013
£m
1,299
(57)
1,242
174
1,416
2012
£m
1,256
(51)
1,205
175
1,380
Trade receivables are predominantly non-interest bearing and their carrying amounts approximate to their fair value.
Trade receivables are stated net of allowances for bad and doubtful debts. The movements in the provision during the year were
as follows:
At start of year
Charge for the year
Trade receivables written off
Disposals
Exchange translation differences
At end of year
22 Assets and liabilities held for sale
The major classes of assets and liabilities of operations classified as held for sale are as follows:
Goodwill
Intangible assets
Property, plant & equipment
Deferred tax assets
Inventories
Trade and other receivables
Total assets held for sale
Trade and other payables
Deferred tax liabilities
Total liabilities associated with assets held for sale
23 Trade and other payables
Payables and accruals
Deferred income
Total
The carrying amount of trade and other payables approximates to their fair value.
2013
£m
51
17
(11)
–
–
57
2013
£m
16
–
–
–
–
5
21
3
–
3
2012
£m
63
13
(18)
(6)
(1)
51
2012
£m
134
84
3
4
1
71
297
69
27
96
2013
£m
1,192
1,403
2,595
2012
£m
1,150
1,394
2,544
29275_SAS_p097-137.indd 132
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
133
24 Borrowings
Financial liabilities measured at amortised cost:
Short term bank loans, overdrafts and commercial paper
Term debt
Finance leases
Term debt in fair value hedging relationships
Term debt previously in fair value hedging relationships
Total
2013
Falling due
within
1 year
£m
Falling due in
more than
1 year
£m
287
–
9
240
112
648
–
1,223
8
938
464
2,633
2012
Falling due
within
1 year
£m
Falling due in
more than
1 year
£m
131
–
7
102
490
730
–
1,526
9
1,036
591
3,162
Total
£m
287
1,223
17
1,178
576
3,281
Total
£m
131
1,526
16
1,138
1,081
3,892
In 2013, £186m principal amount of term debt maturing in 2019 was exchanged for £235m principal amount of term debt maturing in
2022 and cash. The exchange is treated as a debt modification for accounting purposes. The premium arising is offset against the
carrying amount of the newly issued term debt maturing in 2022 and will be amortised over its life.
The total fair value of financial liabilities measured at amortised cost is £1,709m (2012: £1,996m). The total fair value of term debt in fair
value hedging relationships is £1,288m (2012: £1,177m). The total fair value of term debt previously in fair value hedging relationships is
£650m (2012: £1,189m).
Analysis by year of repayment
2013
2012
Short term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
287
–
–
–
–
–
–
287
352
174
400
341
181
1,529
2,625
2,977
9
5
3
–
–
–
8
17
Short term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
131
–
–
–
–
–
–
131
592
644
178
400
359
1,572
3,153
3,745
7
6
3
–
–
–
9
16
Total
£m
648
179
403
341
181
1,529
2,633
3,281
Total
£m
730
650
181
400
359
1,572
3,162
3,892
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
After 1 year
Total
Short term bank loans, overdrafts and commercial paper were backed up at 31 December 2013 by a $2,000m (£1,207m) committed bank
facility maturing in July 2018, which was undrawn.
Analysis by currency
US dollars
£ sterling
Euro
Other currencies
Total
2013
2012
Short term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
87
27
167
6
287
1,800
719
458
–
2,977
17
–
–
–
17
Short term
bank loans,
overdrafts
and
commercial
paper
£m
Term debt
£m
Finance
leases
£m
25
–
103
3
131
2,059
736
950
–
3,745
16
–
–
–
16
Total
£m
1,904
746
625
6
3,281
Total
£m
2,100
736
1,053
3
3,892
Included in the US dollar amounts for term debt above is £427m (2012: £347m) of debt denominated in Swiss francs (CHF 625m;
2012: CHF 500m) that was swapped into US dollars on issuance and against which there are related derivative financial instruments,
which, as at 31 December 2013, had a fair value of £81m (2012: £80m). £65m (2012: £80m) of these derivatives were designated as fair
value hedges of the related Swiss franc debt, and £16m (2012: nil) were undesignated.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 133
07/03/2014 11:26
2013
£m
2012
£m
9
8
17
–
17
9
8
17
7
9
16
–
16
7
9
16
2012
£m
117
309
184
610
134 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
25 Lease arrangements
Finance leases
At 31 December 2013 future finance lease obligations fall due as follows:
Within one year
In the second to fifth years inclusive
Less future finance charges
Total
Present value of future finance lease obligations payable:
Within one year
In the second to fifth years inclusive
Total
The fair value of the lease obligations approximates to their carrying amount.
Operating leases
Reed Elsevier leases various properties, principally offices and warehouses, which have varying terms and renewal rights that are
typical to the territory in which they are located.
At 31 December 2013 outstanding commitments under non-cancellable operating leases fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
Total
2013
£m
103
275
169
547
Of the above outstanding commitments, £528m (2012: £577m) relate to land and buildings.
Reed Elsevier has a number of properties that are sub-leased. The future lease receivables contracted with sub-tenants fall as follows:
Within one year
In the second to fifth years inclusive
After five years
Total
2013
£m
16
43
25
84
2012
£m
16
33
17
66
29275_SAS_p097-137.indd 134
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
135
26 Provisions
At start of year
Transfers
Charged
Utilised
Exchange translation differences
At end of year
2013
Property
£m
Restructuring
£m
164
–
–
(32)
(1)
131
5
–
–
(3)
–
2
Total
£m
169
–
–
(35)
(1)
133
2012
Property
£m
Restructuring
£m
109
22
62
(24)
(5)
164
17
–
–
(12)
–
5
Property provisions relate to estimated sub lease shortfalls and guarantees given in respect of certain property leases for various
periods up to 2024. The charge in 2012 predominantly relates to property exposures on disposed businesses.
At 31 December 2013 provisions are included within current and non-current liabilities as follows:
Current liabilities
Non-current liabilities
Total
2013
£m
17
116
133
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Total
£m
126
22
62
(36)
(5)
169
2012
£m
30
139
169
27 Combined share capitals, share premiums and shares held in treasury
Combined share capitals exclude the shares of Reed Elsevier NV held by a subsidiary of Reed Elsevier PLC. Disclosures in respect of
share capital are given in note 12 to the Reed Elsevier PLC consolidated financial statements and note 13 to the Reed Elsevier NV
consolidated financial statements. Combined share premiums exclude the share premium in respect of shares of Reed Elsevier NV held
by a subsidiary of Reed Elsevier PLC.
During the year Reed Elsevier repurchased 41,961,920 Reed Elsevier PLC ordinary shares, 24,282,106 Reed Elsevier NV ordinary shares
and 94,053 Reed Elsevier NV R shares for consideration of £600m. These shares are held in treasury.
The EBT purchases Reed Elsevier PLC and Reed Elsevier NV shares which, at the trustees’ discretion, can be used in respect of the
exercise of share options and to meet commitments under conditional share awards. At 31 December 2013, shares held by the EBT were
£112m (2012: £152m) at cost.
Details of the shares held in treasury are provided in note 12 of the Reed Elsevier PLC consolidated financial statements and note 13 of
the Reed Elsevier NV consolidated financial statements.
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 135
07/03/2014 11:26
136 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Notes to the combined financial statements
for the year ended 31 December 2013
28 Other combined reserves
At start of year
Profit attributable to parent companies’ shareholders
Dividends paid
Actuarial gains/(losses) on defined benefit pension schemes
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Transfer to net profit from cash flow hedge reserve (net of tax)
Disposal of non-controlling interests
Exchange translation differences
At end of year
Hedge
reserve
2013
£m
Other
reserves
2013
£m
26
–
–
–
–
65
(15)
–
–
(2)
–
(1)
73
226
1,110
(549)
40
–
–
(24)
48
(40)
–
–
(4)
807
Total
2013
£m
252
1,110
(549)
40
–
65
(39)
48
(40)
(2)
–
(5)
880
Total
Restated
2012
£m
(199)
1,044
(521)
(293)
11
70
77
31
(7)
21
6
12
252
Other reserves principally comprise retained earnings and the share based remuneration reserve.
29 Related party transactions
Transactions between the Reed Elsevier combined businesses have been eliminated within the combined financial statements.
Transactions with joint ventures were made on normal market terms of trading and comprise sales of goods and services of £1m
(2012: £1m). As at 31 December 2013, amounts owed by joint ventures were £7m (2012: £1m) and amounts due to joint ventures were £6m
(2012: £1m). Key management personnel are also related parties as defined by IAS24 – Related Party Disclosures and comprise the
Executive and Non-Executive Directors of Reed Elsevier PLC and Reed Elsevier NV.
Key management personnel remuneration is set out below: The remuneration details of Executive Directors employed during 2013 are
given in the Directors’ Remuneration Report single total remuneration table (page 86), with these details forming an integral part of the
financial statements. In addition to the Directors reported in the Remuneration Report, Mark Armour served as an Executive Director
until 31 December 2012. Details of Mr Armour’s remuneration are shown below. For reporting purposes, salary, benefits and annual
incentive payments are considered short term employee benefits.
KEY MANAGEMENT PERSONNEL REMUNERATION
Salaries, other short term employee benefits and non-executive fees
Post employment benefits
Share based remuneration*
Total
2013
£m
4
1
4
9
EXECUTIVE DIRECTORS
Total Executive Directors
Of which: Mark Armour**
Salary
£’000
1,677
1,910
–
645
Benefits
£’000
260
62
–
24
2013
2012
2013
2012
Annual
Incentive
£’000
Cost of
share based
remuneration*
£’000
Cost of
pension
provision*
£’000
1,743
2,074
–
694
3,898
5,079
–
2,067
642
770
–
259
2012
£m
5
1
5
11
Total
£’000
8,220
9,895
–
3,689
* The share based remuneration charge comprises the multi-year incentive scheme charges in accordance with IFRS2 – Share Based
Payment. These IFRS2 charges do not reflect the actual value received on vesting. The cost of pension provision comprises the transfer
value of the increase in accrued pension during the year (net of inflation, Directors’ contributions and participation fee) for defined
benefit schemes and payments made to defined contribution schemes or in lieu of pension.
** Mark Armour served as an Executive Director until 31 December 2012.
29275_SAS_p097-137.indd 136
07/03/2014 11:26
Reed Elsevier Annual Reports and Financial Statements 2013
137
29 Related party transactions continued
NON-EXECUTIVE DIRECTORS
Fees and benefits
2013
£’000
1,088
2012
£’000
1,066
The remuneration details of Non-Executive Directors are set out in the Remuneration Report (page 87), with these details forming an
integral part of the financial statements. No termination benefits were paid to any Director in 2013 (2012: nil). No loans, advances or
guarantees have been provided on behalf of any Director. The aggregate gains made by Executive Directors on the exercise of options
during 2013 were £2,526,305. Details are shown on page 90. As disclosed in last year’s Remuneration Report, the current Executive
Directors did not exercise any options during 2012. Details of Directors’ remuneration are set out in the Directors’ Remuneration Report
on pages 78 to 94.
30 Exchange rates
The following exchange rates have been applied in preparing the combined financial statements:
Euro to sterling
US dollars to sterling
31 Approval of financial statements
Income statement
Statement of
financial position
2013
1.18
1.56
2012
1.23
1.59
2013
1.20
1.66
2012
1.23
1.62
The combined financial statements were approved and authorised for issue by the Boards of Directors of Reed Elsevier PLC and Reed
Elsevier NV on 26 February 2014.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p097-137.indd 137
07/03/2014 11:26
138 FINANCIAL STATEMENTS AND OTHER INFORMATION
INDEPENDENT AUDITORS’ REPORT
Independent auditors’ report
to the members of Reed Elsevier PLC and shareholders of Reed Elsevier NV
Opinion on our audit of the combined financial statements of
Reed Elsevier
In our opinion the combined financial statements:
give a true and fair view of the state of affairs of Reed Elsevier
PLC, Reed Elsevier NV, Reed Elsevier Group plc, Elsevier Reed
Finance BV and their respective subsidiaries, associates and
joint ventures (together “the combined businesses”) as at
31 December 2013 and of their profit and their cash flows for the
year then ended; and
have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
RISK
The assessment of the carrying value of goodwill and acquired
intangible assets;
The combined businesses had £4,576m of goodwill and £2,404m
of acquired intangible assets as at 31 December 2013. The
quantum of these balances together with the inherent judgements
required to be made when performing an impairment review have
resulted in us considering this a significant risk.
The carrying value of internally developed intangible assets in
accordance with IAS38 “Intangible Assets”;
The closing net book value of all capitalised development projects
is £720m. The quantum of these balances together with the
inherent judgements required to be made when performing an
impairment review have resulted in us considering this a
significant risk.
Revenue recognition, including the timing of revenue recognition
and the accounting for multiple element arrangements;
Reed Elsevier’s businesses continue to evolve and new business
models can result in new revenue arrangements. This can result
in circumstances which require careful consideration to
determine how revenue should be recognised.
The valuation of amounts recorded for uncertain tax positions;
Reed Elsevier operates in a significant number of jurisdictions
around the world, all with differing tax regimes with complex
cross-border arrangements, and is therefore open to challenge
from multiple tax authorities.
We have audited the combined financial statements of the
combined businesses which comprise the combined income
statement, the combined statement of comprehensive income, the
combined statement of cash flows, the combined statement of
financial position, the combined statement of changes in equity,
a summary of significant accounting policies and the related
notes 1 to 31. The financial reporting framework that has been
applied in their preparation is applicable law and IFRSs as adopted
by the European Union.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are
those that, in our professional judgement, had the greatest effect
on our audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team:
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE RISK
We challenged management’s assumptions used in the
impairment model for goodwill and acquired intangible assets,
described in note 14 to the combined financial statements,
including specifically the cash flow projections, discount rate,
perpetuity growth rates and sensitivities used.
We challenged management’s assessment as to whether
development projects in-progress were still expected to deliver
sufficient positive economic benefits to the combined businesses
upon their completion, and for completed development projects,
considered whether the useful economic lives selected remained
appropriate.
We performed tests of controls over revenue recognition,
including the timing of revenue recognition and the accounting for
revenue recognition in multiple element arrangements, as well as
substantive testing, analytical procedures and assessing whether
the revenue recognition policies adopted complied with IFRS.
We considered the appropriateness of management’s
assumptions and estimates in relation to uncertain tax positions,
challenging those assumptions and considering advice received
by management from external parties to support their position.
The above matters are selected from the matters communicated
to the Audit Committees, but are not intended to represent all
matters that were discussed with them. The Audit Committees’
consideration of these risks is set out on page 95.
We agreed with the Audit Committees that we would report to the
Committees all audit differences in excess of £1.7m, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
Our audit procedures relating to these matters were designed in
the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures.
Our opinion on the financial statements is not modified with
respect to any of the risks described above, and we do not express
an opinion on these individual matters.
Our application of materiality
We have considered a number of benchmarks in order to guide our
determination of our materiality. We determined materiality for
the combined businesses to be £85m, which is around 7% of
pre-tax profit and below 5% of equity. Our audit work at the
operating locations was executed at levels of materiality lower
than the materiality for the combined businesses and was capped
at £30m or $50m.
An overview of the scope of our audit
Our audit of the combined financial statements was scoped by
obtaining an understanding of the combined businesses and its
environment, including the entity-wide controls, and assessing
the risks of material misstatement at the combined businesses
level. Based on that risk assessment, we designed and performed
audit procedures responsive to those risks, and obtained audit
evidence that is sufficient and appropriate to provide a basis for
our opinion. In making those risk assessments, we considered
internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. As part of
an audit in accordance with the applicable standards, we exercised
professional judgment and maintained professional scepticism
throughout the planning and performance of the audit.
29275_SAS_p138-139 INDEP_AUDIT_REP.indd 138
07/03/2014 11:27
Reed Elsevier Annual Reports and Financial Statements 2013
139
Based on that assessment, our audit scope for the combined
businesses focused primarily on the audits of seventeen operating
locations, which represent the principal business units within the
combined businesses’ five reportable segments. These locations,
together with the combined businesses’ head office functions,
which were also subject to a full scope audit, account for 95% of
the combined businesses’ total assets, 92% of the combined
businesses’ total liabilities, 80% of the combined businesses’
revenue, 84% of the combined businesses’ adjusted operating
profit and 87% of the combined businesses’ profit before tax. They
were also selected to provide an appropriate basis for undertaking
audit work to address the risks of material misstatement
identified above.
The combined businesses’ audit team continued to follow a
programme of planned visits that has been designed so that the
Audit Partners of Reed Elsevier PLC and Reed Elsevier NV
frequently visit the key locations. The Audit Partners also attend
audit close meetings with management of each of the combined
businesses’ five operating segments, alongside the local auditors
of the business units.
We also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant
risks of material misstatement of the aggregated financial
information of the remaining components not subject to audit.
We obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities to
express an opinion on the combined financial statements. We are
responsible for the direction, supervision and performance of the
combined businesses’ audit. We remain responsible for our
audit opinion.
Going concern
The financial statements of the combined businesses have been
prepared using the going concern basis of accounting. The use of
this basis of accounting is appropriate unless management either
intends to liquidate the combined businesses or to cease
operations, or has no realistic alternative but to do so.
We have reviewed the Report of the Boards on page 76 where the
Board has not identified a material uncertainty that may cast
significant doubt on the combined businesses’ ability to continue
as a going concern. We confirm that:
we have not identified material uncertainties related to events
or conditions that may cast significant doubt on the combined
businesses’ ability to continue as a going concern which we
believe would need to be disclosed in accordance with IFRSs as
adopted by the European Union; and
we have concluded that the Board’s use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the combined
businesses’ ability to continue as a going concern.
Other matters
The separate audit reports on the consolidated financial
statements of Reed Elsevier PLC and Reed Elsevier NV, which
have been audited under locally adopted auditing standards and
which include the other opinions required by local laws and
regulations, appear on pages 174 to 175 and 197 to 198.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ responsibilities
statement, the Boards are responsible for the preparation of the
combined financial statements in accordance with International
Financial Reporting Standards as adopted by the European Union
and for being satisfied that they give a true and fair view and for
such internal control as they determine is necessary to enable the
preparation of combined financial statements that are free from
material misstatement, whether due to fraud or error.
Our responsibility is to audit and express an opinion on the
combined financial statements in accordance with International
Standards on Auditing (UK and Ireland) as issued by the United
Kingdom Auditing Practices Board and Dutch Law, including the
Dutch Standards on Auditing. The standards require us to comply
with our respective professions’ ethical requirements, including
the Auditing Practices Board’s Ethical Standards for Auditors and
the International Ethical Standards Board of Accountants Code of
Ethics. We are independent of the group within the meaning of the
applicable law and regulation and have fulfilled our other
responsibilities under those ethical requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
We are required to communicate with the Audit Committees
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We are also required to provide the Audit Committees with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable
related safeguards.
Scope of the audit of the combined financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the combined financial statements sufficient to give
reasonable assurance that the combined financial statements are
free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting
policies are appropriate to the combined businesses’
circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the
combined financial statements. In addition, we read all the
financial and non-financial information in the annual report to
identify material inconsistencies with the audited combined
financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Douglas King (Senior statutory auditor)
For and on behalf of
Deloitte LLP
Chartered Accountants
and Statutory Auditor
London, United Kingdom
26 February 2014
A Sandler
Deloitte Accountants B.V.
Amsterdam
The Netherlands
26 February 2014
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p138-139 INDEP_AUDIT_REP.indd 139
07/03/2014 11:27
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 140
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
141
Summary
combined
financial
information
in euros
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
In this section
142 Combined income statement
142 Combined statement of
comprehensive income
143 Combined statement of cash flows
144 Combined statement of
financial position
145 Combined statement of
changes in equity
146 Notes to the summary combined
financial information in euros
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 141
07/03/2014 11:31
142 FINANCIAL STATEMENTS AND OTHER INFORMATION
SUMMARY COMBINED FINANCIAL STATEMENTS IN EUROS
Introduction
The Reed Elsevier combined financial statements are presented in pounds sterling. This summary financial information presents the
primary combined financial statements and selected notes in euros using the exchange rates provided in note 30 to the combined
financial statements.
Combined income statement
Note
1
1
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration and other expenses
Operating profit before joint ventures
Share of results of joint ventures
Operating profit
Finance income
Finance costs
Net finance costs
Disposals and other non operating items
Profit before tax
Current tax
Deferred tax
Tax expense
Net profit for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Net profit for the year
Combined statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Net profit for the year
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit pension schemes
Tax on items that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Transfer to net profit from cash flow hedge reserve (net of tax)
Tax on items that may be reclassified to profit or loss
Total items that may be reclassified to profit or loss
Other comprehensive loss for the year
Total comprehensive income for the year
Attributable to:
Parent companies’ shareholders
Non-controlling interests
Total comprehensive income for the year
2013
€m
7,121
(2,499)
4,622
(1,186)
(1,847)
1,589
35
1,624
12
(243)
(231)
19
1,412
(416)
320
(96)
1,316
Restated
2012
€m
7,523
(2,631)
4,892
(1,249)
(2,033)
1,610
29
1,639
20
(299)
(279)
56
1,416
(189)
63
(126)
1,290
1,310
6
1,316
1,284
6
1,290
2013
€m
Restated
2012
€m
1,316
1,290
47
(28)
19
(171)
–
77
(2)
(18)
(114)
(95)
1,221
1,215
6
1,221
(360)
118
(242)
(102)
14
86
26
(24)
–
(242)
1,048
1,042
6
1,048
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 142
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
143
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Tax paid (net)
Net cash from operating activities
Cash flows from investing activities
Acquisitions
Purchases of property, plant and equipment
Expenditure on internally developed intangible assets
Purchase of investments
Proceeds from disposals of property, plant and equipment
Gross proceeds from business disposals
Payments on business disposals
Dividends received from joint ventures
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to shareholders of the parent companies
Distributions to non-controlling interests
Increase/(decrease) in short term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Disposal of non-controlling interests
Repurchase of ordinary shares
Proceeds on issue of ordinary shares
Net cash used in financing activities
Note
4
4
2013
€m
2012
€m
2,293
(236)
6
(427)
1,636
(261)
(67)
(296)
(12)
7
367
(137)
26
(373)
(648)
(7)
199
217
(1,080)
(12)
–
(708)
148
(1,891)
2,272
(284)
9
(266)
1,731
(389)
(86)
(323)
(9)
9
289
(101)
25
(585)
(641)
(5)
(534)
728
(538)
(5)
9
(308)
59
(1,235)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Decrease in cash and cash equivalents
4
(628)
(89)
Movement in cash and cash equivalents
At start of year
Decrease in cash and cash equivalents
Exchange translation differences
At end of year
788
(628)
(2)
158
871
(89)
6
788
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 143
07/03/2014 11:31
144 FINANCIAL STATEMENTS AND OTHER INFORMATION
SUMMARY COMBINED FINANCIAL STATEMENTS IN EUROS
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Goodwill
Intangible assets
Investments in joint ventures
Other investments
Property, plant and equipment
Deferred tax assets
Derivative financial instruments
Current assets
Inventories and pre-publication costs
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings
Taxation
Provisions
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Net pension obligations
Provisions
Liabilities associated with assets held for sale
Total liabilities
Net assets
Capital and reserves
Combined share capitals
Combined share premiums
Combined shares held in treasury
Translation reserve
Other combined reserves
Combined shareholders’ equity
Non-controlling interests
Total equity
Note
2013
€m
2012
€m
5,491
3,749
150
110
285
530
77
10,392
171
1,699
149
158
2,177
25
12,594
3,114
5
778
705
20
4,622
16
3,159
1,291
455
139
5,060
4
9,686
2,908
5,591
4,028
123
97
325
97
170
10,431
196
1,697
70
788
2,751
365
13,547
3,129
14
898
742
37
4,820
–
3,889
1,130
573
171
5,763
118
10,701
2,846
269
3,464
(1,757)
25
867
2,868
40
2,908
274
3,354
(1,106)
161
121
2,804
42
2,846
4
6
7
6
2
7
8
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 144
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
Combined statement of changes in equity
Balance at 1 January 2012
Total comprehensive income for the year
Dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Increase in share based remuneration
reserve
Settlement of share awards
Acquisitions
Disposal of non-controlling interests
Exchange differences on translation of
capital and reserves
Balance at 1 January 2013
Total comprehensive income for the year
Dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Increase in share based remuneration
reserve (net of tax)
Settlement of share awards
Exchange differences on translation of
capital and reserves
Balance at 31 December 2013
Combined
share
capitals
€m
268
–
–
1
–
Combined
share
premiums
€m
3,268
–
–
58
–
Combined
shares held
in treasury
€m
(796)
–
–
–
(308)
Translation
reserve
€m
297
(102)
–
–
–
Other
combined
reserves
€m
(431)
1,144
(641)
–
–
–
–
–
–
5
274
–
–
1
–
–
–
–
–
–
–
28
3,354
–
–
147
–
–
–
–
9
–
–
(11)
(1,106)
–
–
–
(708)
–
47
(6)
269
(37)
3,464
10
(1,757)
–
–
–
–
(34)
161
(171)
–
–
–
–
–
35
25
38
(9)
–
8
12
121
1,386
(648)
–
–
57
(47)
(2)
867
Combined
share-
holders’
equity
€m
Non-
controlling
interests
€m
2,606
1,042
(641)
59
(308)
38
–
–
8
–
2,804
1,215
(648)
148
(708)
57
–
–
2,868
30
6
(5)
–
–
–
–
11
1
(1)
42
6
(7)
–
–
–
–
(1)
40
145
Total
equity
€m
2,636
1,048
(646)
59
(308)
38
–
11
9
(1)
2,846
1,221
(655)
148
(708)
57
–
(1)
2,908
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 145
07/03/2014 11:31
146
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
1 Segment analysis
ANALYSIS BY BUSINESS SEGMENT
Revenue
Operating profit
Adjusted operating profit
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Sub-total
Corporate costs
Total
2013
€m
2,509
1,101
645
1,849
1,017
7,121
–
7,121
2012
€m
2,538
1,139
815
1,980
1,051
7,523
–
7,523
2013
€m
876
368
84
164
190
1,682
(58)
1,624
Restated
2012
€m
868
346
93
180
210
1,697
(58)
1,639
2013
€m
975
489
126
281
251
2,122
(58)
2,064
Restated
2012
€m
960
482
146
288
258
2,134
(58)
2,076
Share of post-tax results of joint ventures of €35m (2012: €29m) included in operating profit comprises €7m (2012: €2m) relating
to Legal and €28m (2012: €27m) relating to Exhibitions.
ANALYSIS OF REVENUE BY GEOGRAPHICAL ORIGIN
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY GEOGRAPHICAL MARKET
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
ANALYSIS OF REVENUE BY FORMAT
Electronic
Print
Face to face
Total
2013
€m
3,661
1,162
774
824
700
7,121
2013
€m
3,637
523
196
1,267
1,498
7,121
2013
€m
4,686
1,378
1,057
7,121
2012
€m
3,840
1,188
752
969
774
7,523
2012
€m
3,879
544
203
1,447
1,450
7,523
2012
€m
4,792
1,605
1,126
7,523
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 146
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
147
1 Segment analysis continued
ANALYSIS OF REVENUE BY TYPE
Subscriptions
Transactional
Advertising
Total
2013
€m
3,672
3,166
283
7,121
2012
€m
3,663
3,429
431
7,523
ANALYSIS BY BUSINESS SEGMENT
Expenditure on
acquired goodwill and
intangible assets
Capital
expenditure
additions
Amortisation
of acquired
intangible assets
Depreciation and
other amortisation
Scientific, Technical & Medical
Risk Solutions
Business Information
Legal
Exhibitions
Total
2013
€m
59
193
6
18
66
342
2012
€m
148
18
–
98
219
483
2013
€m
110
30
21
200
18
379
2012
€m
130
26
21
213
31
421
2013
€m
90
114
37
87
47
375
2012
€m
84
134
46
102
39
405
2013
€m
112
26
12
127
17
294
2012
€m
101
28
17
113
20
279
Capital expenditure comprises additions to property, plant and equipment and internally developed intangible assets. Amortisation of
acquired intangible assets includes amounts in respect of joint ventures of €1m (2012: €1m) in Exhibitions. Other than the depreciation
and amortisation above, non cash items include €37m (2012: €38m) relating to the recognition of share based remuneration and
comprise €7m (2012: €6m) in Scientific, Technical & Medical, €4m (2012: nil) in Risk Solutions, €2m (2012: €4m) in Business
Information, €7m (2012: €8m) in Legal, €5m (2012: €5m) in Exhibitions and €12m (2012: €15m) in Corporate.
ANALYSIS OF NON-CURRENT ASSETS BY GEOGRAPHICAL LOCATION
North America
United Kingdom
The Netherlands
Rest of Europe
Rest of world
Total
2013
€m
7,549
701
150
904
481
9,785
2012
€m
8,012
645
148
897
462
10,164
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Non-current assets by geographical location exclude amounts relating to deferred tax assets and derivative financial instruments.
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 147
07/03/2014 11:31
148
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
2 Pension schemes
The pension expense recognised within operating expense is:
ANALYSIS OF REVENUE BY FORMAT
Defined benefit pension expense
Defined contribution pension expense
Total
2013
€m
16
56
72
Restated
2012
€m
53
56
109
The amounts recognised in the income statement in respect of defined benefit pension schemes during the year are presented by major
scheme as follows:
Service cost
Settlement, past service and curtailment
credits
Defined benefit pension expense
Net interest on net defined benefit obligation
Net defined benefit pension expense
UK
€m
34
–
34
7
41
2013
US
€m
34
(60)
(26)
10
(16)
NL
€m
18
(10)
8
5
13
Total
€m
86
(70)
16
22
38
Restated
2012
US
€m
35
(24)
11
9
20
NL
€m
10
–
10
(1)
9
Total
€m
78
(25)
53
14
67
UK
€m
33
(1)
32
6
38
Net interest on defined benefit pension scheme liabilities is presented within net finance costs in the income statement. Service cost,
including settlements, past service credits and curtailments is presented within operating expenses.
The amount recognised in the statement of financial position in respect of defined benefit pension schemes at the start and end of the
year and the movements during the year were as follows:
Defined benefit obligation
At start of year
Service cost
Settlements, past service and
curtailment credits
Interest on pension scheme liabilities
Actuarial (loss)/gain on financial
assumptions
Actuarial (loss)/gain arising from
experience assumptions
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
Fair value of scheme assets
At start of year
Interest income on plan assets
Return on assets excluding amounts
included in interest income
Contributions by employer
Contributions by employees
Benefits paid*
Exchange translation differences
At end of year
NL
€m
Total
€m
(647)
(10)
–
(37)
(4,651)
(78)
25
(244)
UK
€m
2013
US
€m
NL
€m
Total
€m
UK
€m
Restated
2012
US
€m
(3,264)
(34)
(1,135)
(34)
(856)
(18)
(5,255)
(86)
(2,975)
(33)
(1,029)
(35)
–
(144)
60
(49)
(204)
101
9
(7)
111
75
(3,458)
3,095
137
131
42
7
(111)
(72)
3,229
(12)
–
110
44
(915)
874
39
5
39
–
(110)
(36)
811
10
(30)
21
(3)
(6)
22
1
(859)
713
25
(1)
17
6
(22)
(1)
737
70
(223)
1
(153)
24
(54)
(82)
(113)
(179)
(178)
(470)
(6)
(13)
243
120
(5,232)
4,682
201
135
98
13
(243)
(109)
4,777
(18)
(9)
110
(74)
(3,264)
2,845
147
56
78
9
(109)
69
3,095
(22)
–
138
22
(1,135)
871
45
65
47
–
(138)
(16)
874
1
(5)
18
2
(856)
645
38
28
18
5
(19)
(2)
713
(39)
(14)
266
(50)
(5,255)
4,361
230
149
143
14
(266)
51
4,682
Net defined benefit pension obligation
(229)
(104)
(122)
(455)
(169)
(261)
(143)
(573)
* included in benefits paid are settlements of €61m (2012: €92m).
As at 31 December 2013 the defined benefit obligations comprise €5,040m (2012: €5,058m) in relation to funded schemes and €192m
(2012: €197m) in relation to unfunded schemes.
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 148
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
149
3 Adjusted figures
Reed Elsevier uses adjusted figures as additional performance measures. Adjusted operating profit excludes amortisation of acquired
intangible assets, acquisition related costs and the share of taxes in joint ventures. Acquisition related costs relate to acquisition
integration, transaction related fees, and those elements of deferred and contingent consideration required to be expensed under IFRS.
Adjusted profit before tax also excludes disposal related and other non operating items and the net financing charge or credit on defined
benefit pension schemes. The adjusted tax charge excludes the tax effect of these adjusting items, exceptional tax credits (in 2012 only)
and movements on deferred tax assets and liabilities related to goodwill and acquired intangible assets. It includes the benefit of tax
amortisation where available on goodwill and acquired intangible assets. Adjusted operating cash flow is measured after net capital
expenditure and dividends from joint ventures but before payments in relation to prior year exceptional restructuring programmes and
acquisition related costs. Adjusted figures are derived as follows:
Operating profit
Adjustments:
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Adjusted operating profit
Profit before tax
Adjustments:
Amortisation of acquired intangible assets
Acquisition related costs
Reclassification of tax in joint ventures
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Adjusted profit before tax
Tax charge
Adjustments:
Deferred tax movements on goodwill and acquired intangible assets
Tax on acquisition related costs
Reclassification of tax in joint ventures
Tax on net financing charge on defined benefit pension schemes
Tax on disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Adjusted tax charge
Profit attributable to parent companies’ shareholders
Adjustments (post tax):
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credits
Adjusted profit attributable to parent companies’ shareholders
Cash generated from operations
Dividends received from joint ventures
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Expenditure on internally developed intangible assets
Payments in relation to exceptional restructuring costs
Payments in relation to acquisition related costs
Adjusted operating cash flow
2013
€m
Restated
2012
€m
1,624
1,639
375
51
14
2,064
405
26
6
2,076
1,412
1,416
375
51
14
22
(19)
1,855
405
26
6
14
(56)
1,811
(96)
(126)
9
(14)
(14)
(7)
40
(354)
–
(436)
8
(6)
(6)
(4)
(71)
(103)
(118)
(426)
1,310
1,284
384
37
15
21
(354)
–
1,413
2,293
26
(67)
7
(296)
14
33
2,010
413
20
10
(127)
(103)
(118)
1,379
2,272
25
(86)
9
(323)
30
45
1,972
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 149
07/03/2014 11:31
150
FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
4 Statement of cash flows
RECONCILIATION OF OPERATING PROFIT BEFORE JOINT VENTURES TO CASH GENERATED FROM OPERATIONS
Operating profit before joint ventures
Amortisation of acquired intangible assets
Amortisation of internally developed intangible assets
Depreciation of property, plant and equipment
Share based remuneration
Total non cash items
Decrease in inventories and pre-publication costs
Decrease in receivables
Decrease in payables
Increase in working capital
Cash generated from operations
CASH FLOW ON ACQUISITIONS
Purchase of businesses
Investment in joint ventures
Deferred payments relating to prior year acquisitions
Total
RECONCILIATION OF NET BORROWINGS
At start of year
Decrease in cash and cash equivalents
Net movement in short term bank loans, overdrafts and commercial paper
Issuance of term debt
Repayment of term debt
Repayment of finance leases
Change in net borrowings resulting from cash flows
Inception of finance leases
Fair value and other adjustments to borrowings and related derivatives
Exchange translation differences
At end of year
Cash & cash
equivalents
€m
788
Borrowings
€m
(4,787)
Related
derivative
financial
instruments
€m
153
(628)
–
–
–
–
(628)
–
–
(2)
158
–
(182)
(217)
1,080
12
693
(14)
38
133
(3,937)
–
(17)
–
–
–
(17)
–
(39)
(4)
93
2013
€m
1,589
374
189
105
37
705
12
6
(19)
(1)
2,293
2013
€m
(229)
(7)
(25)
(261)
2013
€m
(3,846)
(628)
(199)
(217)
1,080
12
48
(14)
(1)
127
(3,686)
Restated
2012
€m
1,610
404
186
93
38
721
26
5
(90)
(59)
2,272
2012
€m
(339)
(13)
(37)
(389)
2012
€m
(4,119)
(89)
534
(728)
538
5
260
(16)
1
28
(3,846)
Net borrowings comprise cash and cash equivalents, loan capital, finance leases, promissory notes, bank and other loans, derivative
financial instruments that are used to hedge the fair value of fixed rate borrowings, and payable/receivable balances in respect of cash
collateral received/paid.
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 150
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
151
5 Acquisitions
During the year a number of acquisitions were made for a total consideration of €282m (2012: €419m), after taking account of net cash
acquired of €17m (2012: €15m). The net assets of the businesses acquired are incorporated at their fair value to the combined
businesses. Provisional fair values of the consideration given and of the assets and liabilities acquired are summarised below.
Goodwill
Intangible assets
Property, plant & equipment
Current assets
Current liabilities
Current tax
Deferred tax
Net assets acquired
Consideration (after taking account of €17m (2012: €15m) net cash acquired)
Less: consideration deferred to future years
Less: acquisition date fair value of equity interest
Net cash flow
Fair
value
2013
€m
185
157
–
11
(25)
–
(46)
282
282
(42)
(11)
229
Fair
value
2012
€m
203
281
1
26
(75)
3
(20)
419
419
(28)
(52)
339
Goodwill, being the excess of the consideration over the net tangible and intangible assets acquired, represents benefits which do not
qualify for recognition as intangible assets, including the ability of a business to generate higher returns than individual assets, skilled
workforces, acquisition synergies that are specific to Reed Elsevier, and high barriers to market entry. In addition, goodwill arises on the
recognition of deferred tax liabilities in respect of intangible assets for which amortisation does not qualify for tax deductions.
The fair values of the assets and liabilities acquired are provisional pending the completion of the valuation exercises. Final fair values
will be incorporated in the 2014 combined financial statements. There were no significant adjustments to the provisional fair values of
prior year acquisitions established in 2012.
The businesses acquired in 2013 contributed €32m to revenue, increased adjusted operating profit by €9m, increased adjusted net
profit by €9m, decreased reported net profit by €1m, and contributed a net cash outflow of €4m from operating activities for the part
year under Reed Elsevier ownership and before taking account of acquisition financing costs. Had the businesses been acquired at the
beginning of the year, on a pro forma basis the Reed Elsevier revenues, adjusted operating profit, adjusted net profit attributable to
parent companies’ shareholders and net profit attributable to parent companies’ shareholders for the year would have been €7,159m,
€2,066m, €1,415m and €1,312m respectively before taking account of acquisition financing costs.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 151
07/03/2014 11:31
152 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
6 Borrowings
Financial liabilities measured at amortised cost:
Short term bank loans, overdrafts and commercial paper
Term debt
Finance leases
Term debt in fair value hedging relationships
Term debt previously in fair value hedging relationships
Total
2013
Falling due
within
1 year
€m
Falling due in
more than
1 year
€m
344
–
11
288
135
778
–
1,468
9
1,126
556
3,159
Total
€m
344
1,468
20
1,414
691
3,937
2012
Falling due
within
1 year
€m
Falling due in
more than
1 year
€m
161
–
9
125
603
898
–
1,877
11
1,274
727
3,889
Total
€m
161
1,877
20
1,399
1,330
4,787
In 2013, €223m principal amount of term debt maturing in 2019 was exchanged for €282m principal amount of term debt maturing in
2022 and cash. The exchange is treated as a debt modification for accounting purposes. The premium is offset against the carrying
amount of the newly issued term debt maturing in 2022 and will be amortised over its life.
The total fair value of financial liabilities measured at amortised cost is €2,051m (2012: €2,455m). The total fair value of other loans in
fair value hedging relationships is €1,546m (2012: €1,448m). The total fair value of other loans previously in fair value hedging
relationships is €780m (2012: €1,462m).
Analysis by year of repayment
2013
2012
Short term
bank loans,
overdrafts
and
commercial
paper
€m
344
–
–
–
–
–
–
344
Term debt
€m
423
209
480
409
217
1,835
3,150
3,573
Finance
leases
€m
11
6
3
–
–
–
9
20
Total
€m
778
215
483
409
217
1,835
3,159
3,937
Short term
bank loans,
overdrafts
and
commercial
paper
€m
161
–
–
–
–
–
–
161
Term debt
€m
728
792
219
492
442
1,933
3,878
4,606
Finance
leases
€m
9
7
4
–
–
–
11
20
Total
€m
898
799
223
492
442
1,933
3,889
4,787
Within 1 year
Within 1 to 2 years
Within 2 to 3 years
Within 3 to 4 years
Within 4 to 5 years
After 5 years
After 1 year
Total
Short term bank loans, overdrafts and commercial paper were backed up at 31 December 2013 by a $2,000m (€1,448m) committed bank
facility maturing in July 2018, which was undrawn.
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 152
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
153
6 Borrowings continued
Analysis by currency
US dollars
£ sterling
Euro
Other currencies
Total
2013
2012
Short term
bank loans,
overdrafts and
commercial
paper
€m
104
32
201
7
344
Term debt
€m
2,160
863
550
–
3,573
Finance
leases
€m
20
–
–
–
20
Total
€m
2,284
895
751
7
3,937
Short term
bank loans,
overdrafts and
commercial
paper
€m
30
–
127
4
161
Term debt
€m
2,532
905
1,169
–
4,606
Finance
leases
€m
20
–
–
–
20
Total
€m
2,582
905
1,296
4
4,787
Included in the US dollar amounts for term debt above is €512m (2012: €427m) of debt denominated in Swiss francs (CHF 625m;
2012: CHF 500m) that was swapped into US dollars on issuance and against which there are related derivative financial instruments
which, as at 31 December 2013, had a fair value of €97m (2012: €98m). €78m (2012: €98m) of these derivatives were designated as fair
value hedges of the related Swiss franc debt, and €19m (2012: nil) were undesignated.
7 Provisions
At start of year
Transfers
Charged
Utilised
Exchange translation differences
At end of year
2013
Property
€m
Restructuring
€m
202
–
–
(38)
(7)
157
6
–
–
(4)
–
2
Total
€m
208
–
–
(42)
(7)
159
2012
Property
€m
Restructuring
€m
131
27
76
(30)
(2)
202
21
–
–
(15)
–
6
Property provisions relate to estimated sub-lease shortfalls and guarantees given in respect of certain property leases for various
periods up to 2024. The charge in 2012 predominantly relates to property exposures on disposed businesses.
At 31 December 2013 provisions are included within current and non-current liabilities as follows:
Current liabilities
Non-current liabilities
Total
2013
€m
20
139
159
Total
€m
152
27
76
(45)
(2)
208
2012
€m
37
171
208
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 153
07/03/2014 11:31
154 FINANCIAL STATEMENTS AND OTHER INFORMATION
NOTES TO THE SUMMARY COMBINED FINANCIAL INFORMATION IN EUROS
Notes to the summary combined financial information
in euros
8 Other combined reserves
At start of year
Profit attributable to parent companies’ shareholders
Dividends paid
Actuarial gains/(losses) on defined benefit pension schemes
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Transfer to net profit from cash flow hedge reserve (net of tax)
Disposal of non-controlling interests
Exchange translation differences
At end of year
Hedge
reserve
2013
€m
Other
reserves
2013
€m
32
–
–
–
–
77
(18)
–
–
(2)
–
(1)
88
89
1,310
(648)
47
–
–
(28)
57
(47)
–
–
(1)
779
Total
2013
€m
121
1,310
(648)
47
–
77
(46)
57
(47)
(2)
–
(2)
867
Total
Restated
2012
€m
(431)
1,284
(641)
(360)
14
86
94
38
(9)
26
8
12
121
Other reserves principally comprise retained earnings and the share based remuneration reserve.
9 Exchange rates
Sterling to euro
US dollars to euro
Income statement
2013
0.85
1.32
2012
0.81
1.29
Statement of
financial position
2013
0.83
1.38
2012
0.81
1.32
29275_SAS_p140-154 SUMCOMB_FININFO_EUROS.indd 154
07/03/2014 11:31
Reed Elsevier Annual Reports and Financial Statements 2013
155
Reed Elsevier PLC
Annual Report and
Financial Statements
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
In this section
156 Directors’ report
160 Consolidated financial statements
164 Group accounting policies
165 Notes to the consolidated
financial statements
172 Parent company financial statements
173 Parent company accounting policies
173 Note to the parent company
financial statements
174 Independent auditor’s report
176 5 year summary
Company number: 77536
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p155-159.indd 155
07/03/2014 11:32
156 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Directors’ report
The Directors present their report, together with the financial
statements of the group and company, for the year ended
31 December 2013.
As a consequence of the merger of the company’s businesses with
those of Reed Elsevier NV in 1993, described on page 69, the
shareholders of Reed Elsevier PLC and Reed Elsevier NV can be
regarded as having the interests of a single economic group.
The Reed Elsevier combined financial statements represent the
combined interests of both sets of shareholders and encompass
the businesses of Reed Elsevier Group plc, Elsevier Reed Finance
BV and their respective subsidiaries, associates and joint
ventures, together with the parent companies, Reed Elsevier PLC
and Reed Elsevier NV (“the combined businesses” or “Reed
Elsevier”). This Directors’ report and the financial statements of
the group and company should be read in conjunction with the
combined financial statements and other reports set out on pages
2 to 139. A review of the Reed Elsevier combined businesses and
their performance in the year is set out on pages 7 to 39, a
summary of the principal risks facing Reed Elsevier is set out on
pages 60 to 62, and the Reed Elsevier statement on corporate
responsibility is set out on pages 41 to 50.
Financial statement presentation
The consolidated financial statements of Reed Elsevier PLC
include the 52.9% economic interest that shareholders have under
the equalisation arrangements in the Reed Elsevier combined
businesses, accounted for on an equity basis.
Under the terms of the merger agreement, dividends paid to Reed
Elsevier PLC and Reed Elsevier NV shareholders are, other than in
special circumstances, equalised at the gross level inclusive of the
UK tax credit received by certain Reed Elsevier PLC shareholders.
Because of the tax credit, Reed Elsevier PLC normally requires
proportionately less cash to fund its net dividend than Reed
Elsevier NV does to fund its gross dividend. An adjustment is
therefore required in the consolidated income statement of Reed
Elsevier PLC to share this tax benefit between the two sets of
shareholders in accordance with the equalisation agreement. The
equalisation adjustment arises on dividends paid by Reed Elsevier
PLC to its shareholders and it reduced the consolidated
attributable earnings by £15m (2012: £14m), being 47.1% of the
total amount of the tax credit.
In addition to the reported figures, adjusted profit figures are
presented as additional performance measures used by
management. These exclude the tax credit equalisation adjustment
and, in relation to the results of joint ventures, the company’s share
of amortisation of acquired intangible assets, acquisition-related
costs, disposal gains and losses and other non-operating items,
related tax effects, exceptional prior year tax credits (in 2012 only)
and movements in deferred taxation assets and liabilities related to
acquired intangible assets and include the benefit of tax amortisation
where available on acquired goodwill and intangible assets.
Consolidated income statement
Comparative figures have been restated following the adoption
of IAS19 Employee Benefits (revised). Reed Elsevier PLC’s
shareholders’ 52.9% share of the adjusted profit before tax of the
Reed Elsevier combined businesses was £832m (2012: £779m).
Reported profit before tax, including the Reed Elsevier PLC
shareholders’ share of amortisation charges, acquisition-related
costs and disposals and other non-operating items, was £576m
(2012: £532m). The increase reflects the improved trading
performance offset by lower disposal gains.
Elsevier achieved good growth in primary research submissions
and usage, and in databases and tools, across the scientific,
technical and medical segments. At Risk Solutions, all business
segments achieved strong growth. At Business Information
underlying revenue growth accelerated reflecting continued good
growth in data services, modest growth elsewhere, and portfolio
development. Legal maintained positive underlying revenue
growth despite subdued market conditions in the US and Europe.
Exhibitions achieved strong underlying growth excluding the
effect of biennial show cycling; while growth in Europe was
modest, the US, Japan, Brazil and other markets grew well.
The overall adjusted operating margin was 1.4 percentage points
higher despite investment in global technology platforms and
new products and services, reflecting a combination of process
innovation, portfolio development and currency effects.
Reed Elsevier PLC’s shareholders’ share of the adjusted profit
attributable of the combined businesses was £633m (2012:
£593m). After deducting the company’s share of the post tax
charge for amortisation of acquired intangible assets, and
acquisition-related costs, disposal-related and other non-
operating items, the net financing charge on defined benefit
pension schemes, exceptional prior year tax credits (in 2012
only) and movements on deferred taxes related to acquired
intangible assets, the reported net profit for the year was
£572m (2012: £538m).
Adjusted earnings per share increased 9% to 54.0p (2012: 49.4p).
At constant rates of exchange, the adjusted earnings per share
were 7% higher. Including the effect of the tax credit equalisation
as well as amortisation of acquired intangible assets, acquisition-
related costs, disposal-related and other non-operating items, the
net financing charge on defined benefit pension schemes, and tax
adjustments, the basic earnings per share were 48.8p (2012: 44.8p).
Consolidated statement of financial position
The consolidated statement of financial position of Reed Elsevier
PLC reflects its 52.9% economic interest in the net assets of
Reed Elsevier which as at 31 December 2013 was £1,264m
(2012: £1,206m). The £58m increase in net assets reflects the
company’s share in the comprehensive income of Reed Elsevier
partially offset by dividends paid and shares repurchased.
Dividends
The Board is recommending an equalised final dividend of 17.95p
per ordinary share (2012: 17.0p). This gives total ordinary dividends
for the year of 24.60p (2012: 23.0p). The final dividend will be paid
on 23 May 2014 to shareholders on the Register on 2 May 2014.
Dividend cover, based on adjusted earnings per share and the
total interim and proposed final dividends for the year, is 2.2 times.
The Boards of the company and Reed Elsevier NV have adopted
dividend policies in recent years in respect of their equalised
dividends that, subject to currency considerations, grow dividends
broadly in line with adjusted earnings per share whilst maintaining
dividend cover (being the number of times the annual dividend is
covered by the adjusted earnings per share) of at least 2.0 times
over the longer term.
The total dividend paid on the ordinary shares in the financial year
was £278m (2012: £264m).
29275_SAS_p155-159.indd 156
07/03/2014 11:32
Reed Elsevier Annual Reports and Financial Statements 2013
157
Parent company financial statements
The individual parent company financial statements of Reed
Elsevier PLC are presented on pages 172 to 173, and are prepared
under UK Generally Accepted Accounting Practice. Parent
company shareholders’ funds as at 31 December 2013 were
£3,044m (2012: £3,490m).
Corporate governance
The company has complied throughout the year with the
provisions of the UK Corporate Governance Code issued by the
Financial Reporting Council in September 2012 (the UK Code).
The UK Code is publicly available at www.frc.org.uk. Details of
how the principles of the UK Code have been applied and the
Directors’ statement on internal control are set out in the
Structure and Corporate Governance report on pages 69 to 77.
Details of the role and responsibilities, membership and activities
of the Reed Elsevier Audit Committees, including the company’s
Audit Committee, are set out in the Report of the Audit Committees
on pages 95 and 96.
Greenhouse Gas Emissions
The company is required to state the annual quantity of emissions
in tonnes of carbon dioxide equivalent from activities for which the
group is responsible. Details of our emissions during the year ended
31 December 2013 and the actions being taken to reduce them are
set out in the Corporate Responsibility section of the Strategic
Report on pages 49 and 50 and form part of the Directors’ report
disclosures. Further details can be found in our online Corporate
Responsibility Report at www.reedelsevier.com/go/CRReport.
Directors
The following served as Directors of the company during the year:
A J Habgood (Chairman)
E Engstrom (Chief Executive Officer)
D J Palmer (Chief Financial Officer)
M W Elliott (retired 25 April 2013)
W Hauser (appointed 25 April 2013)
A N Hennah
L Hook (Senior Independent Director as of 23 April 2013)
R B Polet
Sir David Reid (retired 25 April 2013)
L S Sanford
B van der Veer
Biographical details of the Directors at the date of this report are
given on pages 64 and 65.
Directors are appointed in accordance with the Articles of
Association (the Articles), which provide that any director
appointed during the year holds office only until the next following
Annual General Meeting (AGM) and is then eligible for election by
the shareholders. The company’s Articles provide that at every
AGM of the company, one-third of the directors (or if their number
is not a multiple of three the number nearest to one-third) shall
retire from office and, if they wish, put themselves up for
re-election by the shareholders. The UK Code recommends that
all directors should seek re-election by shareholders annually.
Accordingly, the Board has adopted this practice.
The office of director shall be vacated if he or she: (i) resigns;
(ii) becomes bankrupt or compounds with his or her creditors
generally; (iii) is or may be suffering from a mental illness; (iv) is
prohibited by law from being a director; or (v) is removed from
office pursuant to the company’s Articles. Subject to the
shareholders’ rights to appoint individuals to the Board in
accordance with the company’s Articles, no individual may be
appointed to the Board unless such appointment is recommended
by the Nominations Committee.
Mark Elliott and Sir David Reid retired as Directors at the
conclusion of the AGM in April 2013 and Wolfhart Hauser was
appointed to the Board on 25 April 2013.
In accordance with the provisions of the UK Code, all of the
Directors will retire from the Board at the AGM in 2014 and, being
eligible, they will each offer themselves for re-election. Taking into
account the assessment by the Corporate Governance Committee
of the qualifications, performance and effectiveness of each
individual Director seeking re-election, the Board has accepted a
recommendation from the Nominations Committee that each
Director be proposed for re-election at the 2014 AGM.
In September 2013, Duncan Palmer gave notice of his resignation
as Chief Financial Officer effective as of 25 September 2014 or
such earlier date as Reed Elsevier may designate. In January 2014,
Reed Elsevier announced the appointment of Nick Luff as Chief
Financial Officer to be effective at a date to be confirmed but is
expected to be no later than 15 December 2014.
In accordance with the Articles, Directors are normally subject
to election by shareholders at the first AGM following their
appointment by the Board. Notwithstanding the effective date of
Nick Luff’s appointment remains to be confirmed, shareholders
will be asked to elect Mr Luff at the AGM in April 2014.
The notice period applicable to the service contracts of
Erik Engstrom, Duncan Palmer and Nick Luff is 12 months.
The remaining Directors seeking re-election at the 2014 AGM
do not have service contracts.
Details of Directors’ remuneration and their interests in the share
capital of the company are provided in the Directors’ Remuneration
Report on pages 78 to 94.
Share capital
The company’s issued share capital comprises a single class of
ordinary shares, all of which are listed on the London Stock
Exchange. All issued shares are fully paid up and carry no
additional obligations or special rights. Each share carries the
right to one vote at general meetings of the company. In a general
meeting, subject to any rights and restrictions attached to any
shares, on a show of hands every member who is present in
person shall have one vote and every proxy present who has been
duly appointed by one or more members entitled to vote on the
resolution has one vote (although a proxy has one vote for and one
vote against the resolution if: (i) the proxy has been duly appointed
by more than one member entitled to vote on the resolution; and (ii)
the proxy has been instructed by one or more of those members to
vote for the resolution and by one or more other of those members
to vote against it). Subject to any rights or restrictions attached to
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p155-159.indd 157
07/03/2014 11:32
158 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Directors’ report
any shares, on a vote on a resolution on a poll every member
present in person or by proxy shall have one vote for every share of
which he is the holder. Proxy appointments and voting instructions
must be received by the company’s registrars not less than 48
hours before a general meeting. There are no specific restrictions
on the size of a holding nor on the transfer of shares, which are
both governed by the general provisions of the Articles and
prevailing legislation. The company is not aware of any
agreements between shareholders that may result in restrictions
on the transfer of shares or on voting rights attached to the shares.
At the 2013 AGM, shareholders passed a resolution authorising
the Directors to allot shares up to a nominal value of £9m,
representing less than 5% of the company’s issued share capital.
Since the 2013 AGM, no shares have been issued under this
authority. The shareholder authority also permitted the Directors
to allot shares in order to satisfy entitlements under employee
share plans, and details of such allotments are noted below. The
authority to allot shares will expire at the 2014 AGM, and a
resolution to further extend the authority will be submitted to the
shareholders at the 2014 AGM.
During the year, 9,438,719 ordinary shares in the company were
issued in order to satisfy entitlements under employee share
plans as follows:
440,685 under a UK Sharesave option scheme at prices
between 401.60p and 596p per share;
7,983,028 under executive share option schemes at prices
between 420p and 734.50p per share; and
1,015,006 under the Long Term Incentive Plan at prices
between 478p and 487.25p per share.
The issued share capital as at 31 December 2013 is shown in note 12
to the consolidated financial statements.
Authority to purchase shares
At the 2013 AGM, shareholders passed a resolution authorising
the purchase of up to 125.9 million ordinary shares in the company
(representing less than 10% of the issued ordinary shares) by
market purchase. During the year, 41,961,920 ordinary shares were
purchased under this and the previous authority. As at 31 December
2013 there were 99,446,834 ordinary shares held in treasury,
representing 7.8% of the issued ordinary shares. A further
6,045,270 ordinary shares were purchased between 1 January
2014 and the date of this report. The authority to make market
purchases will expire at the 2014 AGM, at which a resolution to
further extend the authority will be submitted to shareholders.
Substantial share interests
As at 26 February 2014, the company had been notified by the
following shareholders that they held an interest of 3% or more in
voting rights of the issued share capital of the company:
Franklin Mutual Advisers LLC
BlackRock Inc.
Invesco Limited
Lloyds Banking Group plc
Legal & General Group plc
5.04%
5.03%
5.03%
3.47%
3.40%
The percentage interests stated above are as disclosed at the date
on which the interests were notified to the company.
Employee benefit trust
The Trustee of the Reed Elsevier Group plc Employee Benefit Trust
held an interest in 10,120,537 ordinary shares in the company
(representing 0.80% of the issued ordinary shares) as at
31 December 2013. The Trustee may vote or abstain from voting
any shares it holds in any way it sees fit.
Significant agreements – change of control
The Governing Agreement between Reed Elsevier PLC and Reed
Elsevier NV states that upon a change of control of Reed Elsevier
PLC (for these purposes, the acquisition by a third party of 50% or
more of the issued share capital having voting rights), should there
not be a comparable offer from the offeror for Reed Elsevier NV,
Reed Elsevier NV may serve notice upon Reed Elsevier PLC
varying certain provisions of the Governing Agreement, including
the governance and the standstill provisions.
There are a number of borrowing agreements including credit
facilities that in the event of a change of control of both Reed
Elsevier PLC and Reed Elsevier NV and, in some cases, a
consequential credit rating downgrade to sub-investment grade
may, at the option of the lenders, require repayment and/or
cancellation as appropriate.
Powers of directors
Subject to the provisions of the Companies Act 2006, the
company’s Articles and any directions given by special
resolutions, the business of the company shall be managed by the
Board which may exercise all the powers of the company.
Directors’ indemnity
In accordance with the company’s Articles, the company has
granted Directors an indemnity, to the extent permitted by law, in
respect of liabilities incurred as a result of their office. The
company also purchased and maintained throughout the year
Directors’ and Officers’ liability insurance in respect of itself and
its Directors.
Related party transactions
Internal controls are in place to ensure that any related party
transactions involving Directors or their connected persons are
carried out on an arm’s length basis and are properly recorded.
Conflicts of interest
The Company’s Articles permit the Board to approve situations
where a Director has an interest that conflicts, or may possibly
conflict, with the interests of the company. The Board has
established a formal system whereby the Nominations Committee
considers any such conflict or potential conflict and makes a
recommendation to the Board on whether to authorise it. In
reaching its decision, the Board is required to act in a way it
considers would be most likely to promote the success of the
company and may impose limits or conditions when giving its
authorisation, if it thinks this is appropriate.
Political donations
Reed Elsevier does not make donations to European Union (EU)
political organisations or incur EU political expenditure. In the
United States, Reed Elsevier companies donated £48,000
(2012: £57,201) to political organisations. In line with US law,
these donations were not made at federal level, but only to
candidates and political parties at the state and local levels.
29275_SAS_p155-159.indd 158
07/03/2014 11:32
Reed Elsevier Annual Reports and Financial Statements 2013
159
Financial Statements and accounting records
The Directors are responsible for preparing the Directors’ report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the consolidated financial statements in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU and Article 4 of the IAS Regulation.
The Directors have elected to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law
the Directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of
the company and of the profit or loss of the company for that period.
In preparing the parent company financial statements, the
Directors are required to: select suitable accounting policies and
then apply them consistently; make judgements and accounting
estimates that are reasonable and prudent; state whether
applicable UK Accounting Standards have been followed, subject
to any material departures being disclosed and explained in the
financial statements; and prepare the financial statements on a
going concern basis unless it is inappropriate to presume that the
company will continue in business.
In preparing the group financial statements, IAS1 requires that
directors: properly select and apply accounting policies; present
information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information; provide additional disclosures when compliance with
the specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and make an assessment of the company’s ability to
continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure
that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Directors’ responsibility statement
The Board confirms that, to the best of its knowledge:
the consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as issued by
the International Accounting Standards Board and as adopted
by the European Union, give a true and fair view of the financial
position and profit or loss of the group; and
the Directors’ report includes a fair review of the development
and performance of the business and the position of the group,
together with a description of the principal risks and
uncertainties that it faces.
Having taken into account all the matters considered by the Board
and brought to the attention of the Board during the year, the
Directors are satisfied that the Annual Report and Accounts taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
performance, business model and strategy.
Neither the company nor the Directors accept any liability to any
person in relation to the Annual Report except to the extent that
such liability could arise under English law. Accordingly, any
liability to a person who has demonstrated reliance on any untrue
or misleading statement or omission shall be determined in
accordance with Section 90A of the Financial Services and
Markets Act 2000.
Disclosure of information to auditors
As part of the process of approving the company’s 2013 financial
statements, the Directors have taken steps pursuant to section
418(2) of the Companies Act 2006 to ensure that they are aware of
any relevant audit information and to establish that the company’s
auditors are aware of that information. In that context, so far as the
Directors are aware, there is no relevant audit information of
which the company’s auditors are unaware.
Going concern
The Directors, having made appropriate enquiries, consider that
adequate resources exist for the combined businesses to continue in
operational existence for the foreseeable future and that, therefore,
it is appropriate to adopt the going concern basis in preparing the
2013 financial statements. In reaching this conclusion, the Directors
have had due regard to the combined businesses’ financial position
as at 31 December 2013, the strong free cash flow of the combined
businesses, Reed Elsevier’s ability to access capital markets and
the principal risks facing Reed Elsevier.
A commentary on the Reed Elsevier combined businesses’
cash flows, financial position and liquidity for the year ended
31 December 2013 is set out in the Chief Financial Officer’s Report
on pages 52 to 59. This shows that, after taking account of available
cash resources and committed bank facilities that back up short
term borrowings, none of Reed Elsevier’s borrowings fall due
within the next two years. Reed Elsevier’s policies on liquidity,
capital management and management of risks relating to interest
rate, foreign exchange and credit exposures are set out on pages
58 and 59. Further information on liquidity of the combined
businesses can be found in note 18 of the combined financial
statements. The principal risks facing Reed Elsevier are set out
on pages 60 to 62.
Auditors
Resolutions for the re-appointment of Deloitte LLP as auditors of
the company and to authorise the Directors to fix their
remuneration will be submitted to shareholders at the 2014 AGM.
By order of the Board
Registered Office
Henry Udow
Company Secretary
26 February 2014
1-3 Strand
London
WC2N 5JR
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p155-159.indd 159
07/03/2014 11:32
160 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Effect of tax credit equalisation on distributed earnings
Share of results of joint ventures
Operating profit
Finance income
Profit before tax
Tax (expense)/credit
Profit attributable to ordinary shareholders
Note
1
2
11
5
6
2013
£m
(2)
(15)
583
566
10
576
(4)
572
Restated
2012
£m
(2)
(14)
547
531
1
532
6
538
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Profit attributable to ordinary shareholders
Share of joint ventures’ other comprehensive loss for year
Total comprehensive income for the year
2013
£m
572
(13)
559
Restated
2012
£m
538
(132)
406
Earnings per ordinary share
FOR THE YEAR ENDED 31 DECEMBER
Basic earnings per share
Diluted earnings per share
2013
pence
48.8
48.2
Restated
2012
pence
44.8
44.3
Note
8
8
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 160
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
161
Consolidated statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash used by operations
Interest received
Tax paid
Net cash used in operating activities
Cash flows from investing activities
Dividends received from joint ventures
Net cash received from investing activities
Cash flows from financing activities
Equity dividends paid
Repurchase of ordinary shares
Proceeds on issue of ordinary shares
Decrease/(increase) in net funding balances due from joint ventures
Net cash used in financing activities
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Note
10
11
7
10
2013
£m
2012
£m
(2)
10
(3)
5
102
102
(278)
(326)
50
447
(107)
(2)
1
(2)
(3)
694
694
(264)
(143)
33
(317)
(691)
Movement in cash and cash equivalents
–
–
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 161
07/03/2014 11:34
162 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Consolidated statement of financial position
AS AT 31 DECEMBER
Non-current assets
Investments in joint ventures
Total assets
Current liabilities
Taxation
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Shares held in treasury (including in joint ventures)
Capital redemption reserve
Translation reserve
Other reserves
Total equity
The consolidated financial statements were approved by the Board of Directors, 26 February 2014.
A J Habgood
Chairman
D J Palmer
Chief Financial Officer
Note
11
12
13
2013
£m
1,266
1,266
2
2
1,264
182
1,257
(752)
4
40
533
1,264
2012
£m
1,207
1,207
1
1
1,206
181
1,208
(447)
4
87
173
1,206
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 162
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
163
Consolidated statement of changes in equity
FOR THE YEAR ENDED 31 DECEMBER
Balance at 1 January 2012
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Share of joint ventures’ increase in share
based remuneration reserve
Share of joint ventures’ settlement of share
awards by the employee benefit trust
Share of joint ventures’ disposal of
non-controlling interests
Equalisation adjustments
Balance at 1 January 2013
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of ordinary shares
Share of joint ventures’ increase in share
based remuneration reserve (net of tax)
Share of joint ventures’ settlement of share
awards by the employee benefit trust
Equalisation adjustments
Balance at 31 December 2013
Note
7
7
Share
capital
£m
180
–
–
1
–
Share
premium
£m
1,176
–
–
32
–
Shares
held in
treasury
£m
(308)
–
–
–
(143)
Capital
redemption
reserve
£m
4
–
–
–
–
Translation
reserve
£m
159
(72)
–
–
–
Other
reserves
£m
(62)
478
(264)
–
–
Total equity
£m
1,149
406
(264)
33
(143)
–
–
–
–
181
–
–
1
–
–
–
–
182
–
–
–
–
1,208
–
–
49
–
–
4
–
–
(447)
–
–
–
(326)
–
–
–
–
1,257
21
–
(752)
–
–
–
–
4
–
–
–
–
–
–
–
4
–
–
–
–
87
(47)
–
–
–
–
–
–
40
16
(4)
3
6
173
606
(278)
–
–
16
–
3
6
1,206
559
(278)
50
(326)
25
25
(21)
28
533
–
28
1,264
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 163
07/03/2014 11:34
164 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Group accounting policies
Basis of preparation
These consolidated financial statements have been prepared under
the historical cost convention in accordance with applicable accounting
standards. They report the consolidated statements of income,
comprehensive income, cash flow, financial position and changes
in equity of Reed Elsevier PLC (incorporated and domiciled in the
United Kingdom), and have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and as issued by the International Accounting
Standards Board (IASB).
The consolidated financial statements are prepared on a going
concern basis, as explained on page 159. Unless otherwise
indicated, all amounts shown in the financial statements are in
millions of pounds.
The basis of the merger of the businesses of Reed Elsevier PLC
and Reed Elsevier NV is set out on page 69.
Determination of profit
The Reed Elsevier PLC share of the Reed Elsevier combined results
has been calculated on the basis of the 52.9% economic interest of
the Reed Elsevier PLC shareholders in the Reed Elsevier combined
businesses, after taking account of results arising in Reed Elsevier
PLC and its subsidiaries. Dividends paid to Reed Elsevier PLC
and Reed Elsevier NV shareholders are, other than in special
circumstances, equalised at the gross level inclusive of the UK
tax credit received by certain Reed Elsevier PLC shareholders.
In Reed Elsevier PLC’s consolidated financial statements, an
adjustment is required to equalise the benefit of the tax credit
between the two sets of shareholders in accordance with the
equalisation agreement. This equalisation adjustment arises on
dividends paid by Reed Elsevier PLC to its shareholders and
reduces the consolidated attributable earnings by 47.1% of the
total amount of the tax credit. The accounting policies adopted in
the preparation of the combined financial statements are set out
on pages 102 to 107.
Investments
Reed Elsevier PLC’s 52.9% economic interest in the net assets of the
combined businesses has been shown on the statement of financial
position as investments in joint ventures, net of the assets and liabilities
reported as part of Reed Elsevier PLC and its subsidiaries. Investments
in joint ventures are accounted for using the equity method. The results
of the Reed Elsevier combined businesses are set out on pages 98 to 137.
which is recognised, in the same or a different period, outside profit
or loss (either in other comprehensive income, directly in equity,
or through a business combination) in which case the tax appears
in the same statement as the transaction that gave rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that
taxable profits will be available against which the deductible
temporary differences can be utilised; and reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Deferred tax is not discounted.
Critical judgements and key sources of estimation uncertainty
Critical judgements in the preparation of the combined financial
statements are set out on pages 105 to 106.
Foreign exchange translation
Transactions in foreign currencies are recorded at the rate of exchange
prevailing on the date of the transaction. At each statement of financial
position date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rate prevailing on the
statement of financial position date. Exchange differences arising
are recorded in the income statement. The exchange gains or
losses relating to the retranslation of Reed Elsevier PLC’s 52.9%
economic interest in the net assets of the combined businesses
are classified as equity and transferred to the translation reserve.
When foreign operations are disposed of, the related cumulative
translation differences are recognised within the income
statement in the period.
Standards and amendments effective for the year
As described on page 106 of the combined accounts, the combined
businesses adopted IAS19 Employee Benefits (revised) with effect
from 1 January 2013. As required under the revised standard,
comparative figures have been restated. For the year ended 31
December 2012, Reed Elsevier PLC’s share of results of joint
ventures is £14m lower and basic earnings per share is 1.2p lower
than previously reported. On an adjusted basis, earnings per share
is 0.7p lower than previously reported.
With effect from 1 January 2013, the combined businesses also
adopted various other standards, interpretations and amendments
to IFRS, none of which have had a significant impact on Reed
Elsevier’s accounting policies or reporting.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
Standards, amendments and interpretations not yet effective
Recently issued standards, amendments and interpretations and
their impact on future accounting policies and reporting have been
considered on page 107 of the combined financial statements.
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 164
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
165
Notes to the consolidated financial statements
for the year ended 31 December 2013
1 Administrative expenses
Administrative expenses include £972,000 (2012: £877,000) paid in the year to Reed Elsevier Group plc under a contract for the services
of Directors and administrative support. Reed Elsevier PLC has no employees (2012: nil).
2 Effect of tax credit equalisation on distributed earnings
The tax credit equalisation adjustment arises on ordinary dividends paid by Reed Elsevier PLC to its shareholders and reduces the
consolidated profit attributable to ordinary shareholders by 47.1% of the total amount of the tax credit, as set out in the accounting
policies on page 164.
3 Auditor’s remuneration
Audit fees payable by Reed Elsevier PLC were £29,000 (2012: £28,000). Further information on the audit and non audit fees paid by the
Reed Elsevier combined businesses to Deloitte LLP and its associates is set out in note 3 to the combined financial statements.
4 Related party transactions
All transactions with joint ventures, which are related parties of Reed Elsevier PLC, are reflected in these financial statements.
Key management personnel are also related parties and comprise the Executive Directors of Reed Elsevier PLC. Transactions with
key management personnel are set out in note 29 to the combined financial statements.
5 Finance income
Finance income from joint ventures
6 Taxation
UK corporation tax (expense)/credit
2013
£m
10
2013
£m
(4)
2012
£m
1
2012
£m
6
A reconciliation of the notional tax charge based on the applicable rate of tax to the actual total tax expense is set out below.
Profit before tax
Tax at applicable rate 23.25% (2012: 24.5%)
Tax at applicable rate on share of results of joint ventures
Other
Tax (expense)/credit
2013
£m
576
(134)
136
(6)
(4)
Restated
2012
£m
532
(131)
134
3
6
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 165
07/03/2014 11:34
166 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Notes to the consolidated financial statements
for the year ended 31 December 2013
7 Equity dividends
ORDINARY DIVIDENDS PAID IN THE YEAR
Ordinary shares
Final for prior financial year
Interim for financial year
Total
2013
pence
2012
pence
17.0p
6.65p
23.65p
15.9p
6.0p
21.9p
2013
£m
200
78
278
2012
£m
191
73
264
The Directors of Reed Elsevier PLC have proposed a final dividend of 17.95p (2012: 17.0p). The cost of funding the proposed final dividend
is expected to be £208m. No liability has been recognised at the statement of financial position date.
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Ordinary shares
Interim (paid)
Final (proposed)
Total
8 Earnings per ordinary share (EPS)
2013
pence
2012
pence
6.65p
17.95p
24.60p
6.0p
17.0p
23.0p
Basic earnings per share
Based on 52.9% interest in total operations
of the combined businesses
Diluted earnings per share
2013
2012
Weighted
average
number of
shares
(millions)
1,172.2
1,172.2
1,187.2
Earnings
£m
572
587
572
EPS
pence
48.8
50.1
48.2
Weighted
average
number of
shares
(millions)
1,200.6
1,200.6
1,215.1
Restated
Earnings
£m
Restated
EPS
pence
538
552
538
44.8
46.0
44.3
The diluted EPS figures are calculated after taking account of the effect of potential additional ordinary shares arising from share
options and conditional shares.
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 166
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
167
8 Earnings per ordinary share (EPS) continued
The weighted average number of shares is after deducting shares held in treasury. Movements in the number of shares in issue net of
treasury shares for the year ended 31 December 2013 are shown below.
NUMBER OF ORDINARY SHARES
Year ended 31 December
At start of year
Issue of ordinary shares
Repurchase of ordinary shares
Net release of shares by the employee benefit trust
At end of year
Weighted average number of equivalent ordinary shares during the year
9 Adjusted figures
Shares in
issue
(millions)
1,257.6
9.4
–
–
1,267.0
Treasury
shares
(millions)
(71.0)
–
(41.9)
3.3
(109.6)
2013
Shares in
issue net of
treasury
shares
(millions)
2012
Shares in
issue net of
treasury
shares
(millions)
1,186.6
9.4
(41.9)
3.3
1,157.4
1,172.2
1,202.6
6.7
(23.3)
0.6
1,186.6
1,200.6
Adjusted profit and earnings per share figures are used by management as additional performance measures. The adjusted figures are
derived as follows:
Reported figures
Effect of tax credit equalisation on distributed earnings
Profit attributable to ordinary shareholders based on 52.9% economic interest in the
Reed Elsevier combined businesses
Share of adjustments in joint ventures:
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Adjusted figures
Profit attributable to
ordinary shareholders
Basic earnings
per share
2013
£m
572
15
587
172
16
7
10
(159)
–
633
Restated
2012
£m
538
14
552
178
8
5
(55)
(44)
(51)
593
2013
pence
48.8
1.3
50.1
14.6
1.4
0.6
0.9
(13.6)
–
54.0
Restated
2012
pence
44.8
1.2
46.0
14.8
0.7
0.4
(4.6)
(3.7)
(4.2)
49.4
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 167
07/03/2014 11:34
168 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Notes to the consolidated financial statements
for the year ended 31 December 2013
10 Statement of cash flows
RECONCILIATION OF ADMINISTRATIVE EXPENSES TO CASH USED BY OPERATIONS
Administrative expenses
Cash used by operations
RECONCILIATION OF NET FUNDING BALANCES DUE FROM JOINT VENTURES
At start of year
Cash flow
At end of year
11 Investments in joint ventures
Share of results of joint ventures
Share of joint ventures’ other comprehensive loss
Share of joint ventures’ disposal of non-controlling interests
Share of joint ventures’ increase in share based remuneration reserve (net of tax)
Equalisation adjustments
Dividends received from joint ventures
(Decrease)/increase in net funding balances due from joint ventures
Net movement in the year
At start of year
At end of year
2013
£m
(2)
(2)
2013
£m
949
(447)
502
2013
£m
583
(13)
–
25
13
(102)
(447)
59
1,207
1,266
2012
£m
(2)
(2)
2012
£m
632
317
949
Restated
2012
£m
547
(132)
3
16
(8)
(694)
317
49
1,158
1,207
During the year the company received dividends of £102m from Elsevier Reed Finance BV.
Summarised information showing total amounts in respect of joint ventures and Reed Elsevier PLC shareholders’ 52.9% share is set
out below:
Revenue
Net profit for the year
Total joint ventures
2013
£m
6,035
1,115
Restated
2012
£m
6,116
1,049
Reed Elsevier PLC
shareholders’ share
2013
£m
3,193
583
Restated
2012
£m
3,235
547
Reed Elsevier PLC’s share of joint ventures’ net profit attributable to parent company shareholders for the year excludes the net profit
that arose directly in Reed Elsevier PLC of £4m (2012: £5m).
Reed Elsevier PLC’s other comprehensive income includes a loss of £13m (2012: £132m) relating to joint ventures.
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 168
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
169
11 Investments in joint ventures continued
Total assets
Total liabilities
Net assets
Attributable to:
Joint ventures
Non-controlling interests
Funding balances due from joint ventures
Total
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
Total joint ventures
Reed Elsevier PLC
shareholders’ share
2013
£m
10,495
(8,072)
2,423
2,390
33
2,423
2012
£m
11,014
(8,700)
2,314
2,280
34
2,314
2013
£m
5,552
(4,788)
764
764
–
764
502
1,266
2012
£m
5,826
(5,568)
258
258
–
258
949
1,207
The above amounts for Reed Elsevier PLC’s shareholders’ share of total assets and total liabilities exclude assets and liabilities held
by Reed Elsevier PLC, but include the counterparty balances of amounts owed to and by other Reed Elsevier businesses. Included
within Reed Elsevier PLC’s share of assets and liabilities are cash and cash equivalents of £70m (2012: £339m) and borrowings of
£1,736m (2012: £2,059m) respectively.
12 Share capital and shares held in treasury
CALLED UP SHARE CAPITAL – ISSUED AND FULLY PAID
At start of year
Issue of ordinary shares
At end of year
No. of shares
1,257,597,977
9,438,719
1,267,036,696
2013
£m
181
1
182
No. of shares
1,250,913,565
6,684,412
1,257,597,977
2012
£m
180
1
181
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
All of the ordinary shares rank equally with respect to voting rights and rights to receive dividends, except for shares held in treasury by
the parent company, which do not attract voting or dividend rights. There are no restrictions on the rights to transfer shares.
The issue of ordinary shares relates to the exercise of share options. Details of share option and conditional share schemes are set out in
note 6 to the Reed Elsevier combined financial statements.
At 31 December 2013, shares held in treasury related to 10,120,537 (2012: 13,451,468) Reed Elsevier PLC ordinary shares held by the
Reed Elsevier Group plc Employee Benefit Trust (EBT); and 99,446,834 (2012: 57,484,914) Reed Elsevier PLC ordinary shares held by the
parent company.
G
o
v
e
r
n
a
n
c
e
The EBT purchases Reed Elsevier PLC shares which, at the Trustee’s discretion, can be used in respect of the exercise of share options
and to meet commitments under conditional share awards. At 31 December 2013, Reed Elsevier PLC shares held by the EBT were
£64m (2012: £84m) at cost.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 169
07/03/2014 11:34
170 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Notes to the consolidated financial statements
for the year ended 31 December 2013
13 Other reserves
At start of year
Profit attributable to ordinary shareholders
Share of joint ventures’:
Actuarial gains/(losses) on defined benefit pension schemes
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Transfer to net profit from cash flow hedge reserve (net of tax)
Disposal of non-controlling interests
Equalisation adjustments
Equity dividends paid
At end of year
2013
£m
173
572
21
–
34
(20)
25
(21)
(1)
–
28
(278)
533
Restated
2012
£m
(62)
538
(155)
6
37
41
16
(4)
11
3
6
(264)
173
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 170
07/03/2014 11:34
Reed Elsevier Annual Reports and Financial Statements 2013
171
14 Contingent liabilities
There are contingent liabilities in respect of borrowings of joint ventures guaranteed by Reed Elsevier PLC as follows:
Guaranteed jointly and severally with Reed Elsevier NV
2013
£m
3,063
2012
£m
3,595
Financial instruments disclosures in respect of the borrowings covered by the above guarantees are given in note 18 to the Reed Elsevier
combined financial statements.
15 Principal joint ventures
Reed Elsevier Group plc
Incorporated and operating in Great Britain
1-3 Strand
London WC2N 5JR
Holding company for operating businesses involved in
science & medical, risk management, legal and business
publishing and organisation of trade exhibitions
Elsevier Reed Finance BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, the Netherlands Holding company
for financing businesses
18,385 ordinary R shares
18,385 ordinary E shares
100,000 7.5% cumulative preference non voting shares
Equivalent to a 50% equity interest
133 ordinary R shares
205 ordinary E shares
Equivalent to a 39% equity interest
The E shares in Reed Elsevier Group plc and Elsevier Reed Finance BV are owned by Reed Elsevier NV.
16 Principal subsidiary
Reed Holding BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, the Netherlands
191 ordinary shares
% holding
100%
–
100%
100%
–
% holding
100%
At 31 December 2013 Reed Holding BV owned 4,146,785 (2012: 4,240,838) shares of a separate class in Reed Elsevier NV.
The equalisation arrangements entered into between Reed Elsevier PLC and Reed Elsevier NV at the time of the merger give
Reed Elsevier PLC a 5.8% economic interest in Reed Elsevier NV.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p160-171 CONSOLID_STATEMNTS.indd 171
07/03/2014 11:34
172 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Parent company balance sheet
AS AT 31 DECEMBER
Fixed assets
Investments in subsidiary undertakings
Investments in joint ventures
Current assets
Debtors: amounts due from joint ventures
Creditors: amounts falling due within one year
Taxation
Amounts owed to subsidiary undertakings
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Shares held in treasury
Capital redemption reserve
Other reserves
Profit and loss reserve
Shareholders’ funds
Note
1
1
2013
£m
2012
£m
309
2,312
2,621
502
502
(2)
(77)
(79)
423
3,044
182
1,257
(693)
4
152
2,142
3,044
309
2,310
2,619
949
949
(1)
(77)
(78)
871
3,490
181
1,208
(367)
4
150
2,314
3,490
The parent company financial statements were approved by the Board of directors, 26 February 2014.
A J Habgood
Chairman
D J Palmer
Chief Financial Officer
Parent company reconciliation of shareholders’ funds
At 1 January 2012
Profit attributable to ordinary shareholders
Equity dividends paid
Repurchase of ordinary shares
Issue of ordinary shares, net of expenses
Equity instruments granted to employees of
combined businesses
At 1 January 2013
Profit attributable to ordinary shareholders
Equity dividends paid
Repurchase of ordinary shares
Issue of ordinary shares, net of expenses
Equity instruments granted to employees of
combined businesses
At 31 December 2013
Share
capital
£m
180
–
–
–
1
–
181
–
–
–
1
–
182
Share
premium
account
£m
1,176
–
–
–
32
–
1,208
–
–
–
49
–
1,257
Shares
held in
treasury
£m
(224)
–
–
(143)
–
Capital
redemption
reserve
£m
4
–
–
–
–
Other
reserves
£m
148
–
–
–
–
–
(367)
–
–
(326)
–
–
(693)
–
4
–
–
–
–
–
4
2
150
–
–
–
–
2
152
Profit
and loss
reserve
£m
1,879
699
(264)
–
–
–
2,314
106
(278)
–
–
–
2,142
Total
£m
3,163
699
(264)
(143)
33
2
3,490
106
(278)
(326)
50
2
3,044
29275_SAS_p172-173 PARENT CO INFO.indd 172
07/03/2014 11:35
Reed Elsevier Annual Reports and Financial Statements 2013
173
Parent company accounting policies
Basis of preparation
The parent company financial statements have been prepared
under the historical cost convention in accordance with UK
Generally Accepted Accounting Practice (UK GAAP). Unless
otherwise indicated, all amounts in the financial statements are in
millions of pounds.
The parent company financial statements are prepared on a going
concern basis, as explained on page 159.
As permitted by section 408 of the Companies Act 2006, the
company has not presented its own profit and loss account.
The Reed Elsevier PLC accounting policies under UK GAAP are
set out below.
Investments
Fixed asset investments in the Reed Elsevier combined
businesses are stated at cost, less provision, if appropriate, for
any impairment in value. The fair value of the award of share
options and conditional shares over Reed Elsevier PLC ordinary
shares to employees of the Reed Elsevier combined businesses
are treated as a capital contribution.
Principal joint ventures and subsidiaries are set out in notes 15 and
16 of the Reed Elsevier PLC consolidated financial statements.
Shares held in treasury
The consideration paid, including directly attributable costs, for
shares repurchased is recognised as shares held in treasury and
presented as a deduction from total equity. Details of share capital
and shares held in treasury are set out in note 12 of the Reed
Elsevier PLC consolidated financial statements and note 27 of the
Reed Elsevier combined financial statements.
Foreign exchange translation
Transactions entered into in foreign currencies are recorded at
the exchange rates applicable at the time of the transaction.
Taxation
Deferred tax is provided in full for timing differences using the
liability method. Deferred tax assets are only recognised to the
extent that they are considered recoverable in the short term.
Deferred tax balances are not discounted.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Note to the parent company financial statements
1 Investments
At 1 January 2012
Equity instruments granted to Reed Elsevier employees
At 1 January 2013
Equity instruments granted to Reed Elsevier employees
At 31 December 2013
Subsidiary
undertaking
£m
309
–
309
–
309
Joint
ventures
£m
2,308
2
2,310
2
2,312
Total
£m
2,617
2
2,619
2
2,621
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p172-173 PARENT CO INFO.indd 173
07/03/2014 11:35
174 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Independent auditor’s report to the members of Reed Elsevier PLC
Opinion on our audit of the consolidated and parent company
financial statements of Reed Elsevier PLC (“the Company”)
In our opinion:
the financial statements give a true and fair view of the state
of the Company’s affairs as at 31 December 2013 and of the
consolidated profit and their cash flows for the year then ended;
the consolidated financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice and in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the
IAS Regulation.
We have audited the consolidated financial statements which
comprise the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated cash flow
statement, the consolidated statement of financial position, the
consolidated statements of changes in equity, a summary of the
consolidated accounting policies and the related notes 1 to 16.
The financial reporting framework that has been applied in the
preparation of the consolidated financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union. The parent company financial
statements comprise the parent company balance sheet, the
parent company reconciliation of shareholders’ funds, a summary
of the parent company significant accounting policies and the
related note. The financial reporting framework that has been
applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards.
Our assessment of risks of material misstatement, application
of materiality and overview of the scope of our audit
Given the nature of the Reed Elsevier PLC and Reed Elsevier
NV legal structure, our assessment of risks of material
misstatement, materiality and audit scoping for the Combined
Businesses equally applies to the audit of the parent company
and the consolidated financial statements of Reed Elsevier PLC.
See page 138 for further details.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies
are appropriate to the Company’s circumstances and have
been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information
in the annual report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we
have formed.
We are required to communicate with the Audit Committee
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We are also required to provide the Audit Committee with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable
related safeguards.
Going Concern
As required by the Listing Rules we have reviewed the directors’
statement contained on page 76 that the Company is a going
concern. We confirm that given the nature of the Reed Elsevier
PLC and Reed Elsevier NV legal structure, our assessment of the
combined businesses’ ability to continue as a going concern
equally applies to the parent company and the consolidated
financial statements of Reed Elsevier PLC.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Company’s
ability to continue as a going concern.
29275_SAS_p174-175.indd 174
07/03/2014 11:36
Reed Elsevier Annual Reports and Financial Statements 2013
175
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
we have not received all the information and explanations we
require for our audit; or
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in
our opinion certain disclosures of directors’ remuneration have
not been made or the part of the Directors’ Remuneration Report
to be audited is not in agreement with the accounting records and
returns. Under the Listing Rules we are required to review certain
elements of the Directors’ Remuneration Report. We have nothing
to report arising from these matters or our review.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of
the Corporate Governance Statement relating to the company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under the ISAs (UK and Ireland), we are required to report to you if,
in our opinion, information in the annual report is:
materially inconsistent with the information in the audited
financial statements; or
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Company acquired in
the course of performing our audit; or
is otherwise misleading.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider
the annual report is fair, balanced and understandable and
whether the annual report appropriately discloses those matters
that we communicated to the Audit Committee which we consider
should have been disclosed.
We have nothing to report in respect of these matters.
Douglas King (Senior statutory auditor)
For and on behalf of
Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
26 February 2014
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p174-175.indd 175
07/03/2014 11:36
176 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
5 year summary
Combined financial information
Revenue
Reported operating profit
Adjusted operating profit
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reed Elsevier PLC consolidated financial information
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reported earnings per ordinary share (pence)
Adjusted earnings per ordinary share (pence)
Dividend per ordinary share (pence)
IAS19 (revised)(5)
2013
£m
2012
£m
Note
As reported
2012
£m
2011
£m
2010
£m
2009
£m
6,035
1,376
1,749
1,110
1,197
572
633
48.8
54.0
24.60p
1
1
2
3
2
3
4
6,116
1,333
1,688
1,044
1,121
538
593
44.8p
49.4p
23.0p
6,116
1,358
1,713
1,069
1,138
552
602
46.0p
50.1p
23.0p
6,002
1,205
1,626
760
1,060
389
561
32.4p
46.7p
21.55p
6,055
1,090
1,555
642
983
327
520
27.3p
43.4p
20.4p
6,071
787
1,570
391
982
195
519
17.2p
45.9p
20.4p
(1) Adjusted figures are presented as additional performance measures used by management and are stated before amortisation and
impairment of acquired intangible assets and goodwill, the net financing cost on defined benefit pension schemes, exceptional
restructuring (2008 - 2010) and acquisition related costs, exceptional prior year tax credits (in 2012 only), and in respect of
attributable net profit, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not
expected to crystallise in the near term and includes the benefit of tax amortisation where available on acquired goodwill and
intangible assets. Acquisition related financing costs and profit and loss from disposal gains and losses and other non operating
items are also excluded from the adjusted figures.
(2) Reported net profit attributable to shareholders and reported earnings per share are based on the 52.9% share of the Reed Elsevier
combined profit attributable to shareholders, adjusted to equalise the benefit of the UK dividend tax credit with Reed Elsevier NV
shareholders as a reduction in reported profits.
(3) Adjusted net profit attributable to shareholders and adjusted earnings per share are based on the 52.9% share of the Reed Elsevier
combined profit attributable to Reed Elsevier PLC shareholders.
(4) Dividend per ordinary share is based on the interim dividend and proposed final dividend for the relevant year.
(5) Comparative figures for 2012 have been restated following the adoption of IAS19 Employee Benefits (revised).
29275_SAS_p176 5YEAR SUMMARY.indd 176
07/03/2014 11:37
Reed Elsevier Annual Reports and Financial Statements 2013
177
Reed Elsevier NV
Annual Report and
Financial Statements
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
In this section
178 Report of the Board
182 Consolidated financial statements
184 Group accounting policies
186 Notes to the consolidated financial
statements
194 Parent company financial statements
195 Parent company accounting policies
196 Notes to the parent company financial
statements
196 Additional information
197 Independent auditor’s report
199 5 year summary
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p177-181 REP SUPBOARD AND EXECBOARD.indd 177
07/03/2014 13:06
178 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Report of the Board
The non-executive and executive directors present their joint
report, together with the financial statements of the group and of
the company, for the year ended 31 December 2013.
As a consequence of the merger of the company’s businesses with
those of Reed Elsevier PLC in 1993, described on page 69, the
shareholders of Reed Elsevier NV and Reed Elsevier PLC can be
regarded as having the interests of a single economic group. The
Reed Elsevier combined financial statements represent the
combined interests of both sets of shareholders and encompass
the businesses of Reed Elsevier Group plc, Elsevier Reed Finance
BV and their respective subsidiaries, associates and joint ventures,
together with the parent companies, Reed Elsevier NV and Reed
Elsevier PLC (“the combined businesses” or “Reed Elsevier”).
This report of the Board and the consolidated and parent company
financial statements should be read in conjunction with the Reed
Elsevier combined financial statements and other reports set out
on pages 2 to 154, which are incorporated by reference herein.
Summary combined financial information in euros is set out
on pages 141 to 154. The combined financial statements on pages
97 to 139 are to be considered as part of the notes to the statutory
financial statements. The annual report of Reed Elsevier NV
within the meaning of article 2:391 of the Dutch Civil Code
consists of pages 177 to 181 and, incorporated by reference, pages
2 to 154. The Corporate Governance Statement of Reed Elsevier
NV dated 26 February 2014 is published on the Reed Elsevier
website (www.reedelsevier.com) and is incorporated by reference
herein as per the Vaststellingsbesluit nadere voorschriften
inhoud jaarverslag January 2010 article 2a under 1 sub b.
Principal activities
The company is a holding company and its principal investments
are its direct 50% shareholding in Reed Elsevier Group plc and its
direct 61% shareholding in Elsevier Reed Finance BV, which are
engaged in publishing and information activities and financing
activities respectively. The remaining shareholdings in these two
companies are held by Reed Elsevier PLC.
Reed Elsevier NV and Reed Elsevier PLC have retained their
separate legal identities and are publicly held companies. Reed
Elsevier NV’s securities are listed in Amsterdam and New York
and Reed Elsevier PLC’s securities are listed in London and
New York.
Financial statement presentation
The consolidated financial statements of Reed Elsevier NV include
the 50% economic interest that its shareholders (including Reed
Elsevier PLC, which has an indirect 5.8% interest in the company)
have under the equalisation arrangements in the Reed Elsevier
combined businesses, accounted for on an equity basis.
Under the terms of the merger agreement, dividends paid to Reed
Elsevier NV and Reed Elsevier PLC shareholders are, other than in
special circumstances, equalised at the gross level inclusive of the
UK tax credit received by certain Reed Elsevier PLC shareholders.
In addition to the reported figures, adjusted profit figures are
presented as additional performance measures used by
management. These exclude in relation to the results of joint
ventures, the company’s share of amortisation of acquired
intangible assets, acquisition related costs, disposal related
and other non operating items, the net pension financing charge
or credit, exceptional prior year tax credits and movements in
deferred taxation assets and liabilities not expected to crystallise
in the near term and include the benefit of tax amortisation where
available on acquired goodwill and intangible assets.
Consolidated income statement
Comparative figures have been restated following the adoption of
IAS19 Employee Benefits (revised). Reed Elsevier NV’s
shareholders’ 50% share of the adjusted profit before tax of the
Reed Elsevier combined businesses was €928m (2012: €906m).
Reported profit before tax, including the Reed Elsevier NV
shareholders’ share of amortisation, acquisition related costs and
disposals and non operating items, was €659m (2012: €644m).
The increase reflects the improved trading performance offset by
lower disposal gains.
Elsevier achieved good growth in primary research submissions
and usage, and in databases & tools, across the scientific,
technical and medical segments. At Risk Solutions, all business
segments achieved strong growth. At Business Information
underlying revenue growth accelerated reflecting continued good
growth in data services, modest growth elsewhere, and portfolio
development. Legal maintained positive underlying revenue
growth despite subdued market conditions in the US and Europe.
Exhibitions achieved strong underlying growth excluding the
effect of biennial show cycling; while growth in Europe was
modest, the US, Japan, Brazil and other markets grew well.
The overall adjusted operating margin was 1.4 percentage points
higher despite investment in global technology platforms and
new products and services, reflecting a combination of process
innovation, portfolio development and currency effects.
Reed Elsevier NV ’s shareholders’ share of the adjusted profit
attributable of the combined businesses was €707m (2012:
€689m). After deducting the company’s share of the post tax
charge for amortisation of acquired intangible assets, acquisition
related costs, disposal related and other non operating items,
the net financing charge on defined benefit pension schemes
exceptional prior year tax credits (in 2012 only) and movements
in deferred taxes related to acquired intangible assets
the reported net profit for the year was €655m (2012: €642m).
Adjusted earnings per share increased 5% to €0.99 (2012: €0.94).
At constant rates of exchange, the adjusted earnings per share
were 7% higher. Including amortisation of acquired intangible
assets, acquisition related costs, disposal related and other non
operating items, the net financing charge on defined benefit
pension schemes and tax adjustments, the basic earnings per
share were €0.91 (2012: €0.87).
Consolidated statement of financial position
The consolidated statement of financial position of Reed
Elsevier NV reflects its 50% economic interest in the net assets
of Reed Elsevier which as at 31 December 2013 was €1,434m
(2012: €1,402 m). The €32m increase in net assets reflects the
company’s share in the comprehensive income of Reed Elsevier
partially offset by dividends paid and shares repurchased.
29275_SAS_p177-181 REP SUPBOARD AND EXECBOARD.indd 178
07/03/2014 13:06
Reed Elsevier Annual Reports and Financial Statements 2013
179
Parent company financial statements
In accordance with article 2:362(1) of the Dutch Civil Code, the
individual parent company financial statements of Reed Elsevier NV
(presented on pages 194 to 198) are prepared under UK Generally
Accepted Accounting Practice (UK GAAP). The profit attributable
to the shareholders of Reed Elsevier NV was €199m (2012: €758m)
and net assets as at 31 December 2013, principally representing
the investments in Reed Elsevier Group plc and Elsevier Reed
Finance BV under the historical cost method and loans to their
subsidiaries, were €4,579m (2012: €4,948 m). Free reserves as at
31 December 2013 were €4,329m (2012: €4,701m), comprising
reserves and paid-in surplus less shares held in treasury.
Dividends
The Board is recommending an equalised final dividend of €0.374
per ordinary share, up 11% compared with the prior year. This
gives total ordinary dividends for the year of €0.506 (2012: €0.467),
up 8% on 2012. The final dividend will be paid on 23 May 2014.
Dividend cover, based on adjusted earnings per share and the
total interim and proposed final dividends for the year, is 2.0 times.
The Boards of the company and Reed Elsevier PLC have adopted
dividend policies in recent years in respect of their equalised
dividends that, subject to currency considerations, grow dividends
broadly in line with adjusted earnings per share whilst maintaining
dividend cover (being the number of times the annual dividend is
covered by the adjusted earnings per share) of at least two times
over the longer term.
The total dividend paid on the ordinary shares in the financial year
was €321m (2012: €319m).
Share capital
During 2013, 8,165,731 ordinary shares in the company were
issued as follows:
under convertible debentures at prices between €11.19
and €15.87
under executive share option schemes at prices between
€11.155 and €15.825
Information regarding shares outstanding at 31 December 2013 is
shown in note 13 to the consolidated financial statements.
At 31 December 2013 the total shares held in treasury were
67,451,493. Of these 4,992,360 ordinary shares were held by the
Reed Elsevier Group plc Employee Benefit Trust and 60,895,193
ordinary shares and 156,394 R shares (equivalent to 1,563,940
ordinary shares) were held by Reed Elsevier NV.
Substantial holdings
As at 26 February 2014, based on the public database of and on
notification received from the Netherlands Authority for the
Financial Markets, the company is aware of interests in the capital
and voting rights of the issued share capital of the company of at
least 3% by the following persons or organisations:
FIL Limited
The Bank of New York Mellon Corporation
Causeway Capital Management LLC
BlackRock, Inc
Credit Suisse Group AG
ING Groep N.V.
Reed Elsevier PLC
Authority to purchase shares
At the 2013 Annual General Meeting, shareholders passed a
resolution delegating the authority to the Board to acquire shares
in the Company for a period of 18 months from the date of the
Annual General Meeting of Shareholders and therefore up to and
including 23 October 2014, for the maximum amount of 10% of the
issued capital. During the year, 24,282,106 ordinary shares and
additionally 94,053 R shares (equivalent to 940,530 ordinary
shares), were purchased under this and the previous delegation of
authority. As at 31 December 2013 there were 65,887,553 ordinary
shares held in treasury, representing 9% of the issued ordinary
shares. A further 3,511,668 ordinary shares were purchased
between 1 January 2014 and the date of this report.
A resolution to renew the delegation of the authority to the
Board will be submitted to the shareholders at the 2014 Annual
General Meeting.
Corporate Governance
Reed Elsevier NV and Reed Elsevier PLC are subject to various
corporate governance principles and best practice codes, in
particular the Dutch Corporate Governance Code issued in
December 2008 (the Dutch Code) and the UK Corporate Governance
Code issued by the UK Financial Reporting Council in September
2012 (the UK Code). Reed Elsevier NV may not apply fully the
verbatim language of these codes, but does fully apply the
principles and best practice provisions other than, in respect of the
Dutch Code, the following for reasons explained below:
Best practice provision II.2.5: Executive directors are required
to build up a minimum shareholding and meeting the relevant
shareholding requirement is both a condition of the vesting of
awards as well as a pre-requisite to maintain eligibility to
receive future awards under the multi-year incentives. Reed
Elsevier uses long term incentive arrangements in the form of
awards of shares which may vest after three years. The intent
of this shareholding policy is to align the interests of senior
executives and shareholders. This intent is in compliance with
the Dutch Code. Shares received on joining Reed Elsevier in
compensation for benefits forfeited under incentive schemes
from a previous employer are not to be considered as part of
the minimum shareholding in this context.
Best practice provision II.2.8: Reed Elsevier has
arrangements that are commensurate with local and legal
requirements to ensure a competitive employment offer to its
Board Members. Executive directors have service contracts
under English law that provide for notice periods not exceeding
one year. There are currently no executive directors with
employment agreements under Dutch law. In the event of
dismissal, notice is given in accordance with the agreed notice
period. The notice period applicable to the service contracts of
executive directors is 12 months. The payment during the
notice period may be mitigated if the director finds other
employment within this period. The application of this
arrangement may fall within the best practice provision that
remuneration in the event of dismissal may not exceed the fixed
component of one year’s salary. There are no other severance
arrangements in place for the executive directors and none of
the service contracts contain severance pay arrangements.
Although the principle that severance pay should not exceed
the fixed component of one year’s salary is supported, there
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p177-181 REP SUPBOARD AND EXECBOARD.indd 179
07/03/2014 13:06
180 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
may be exceptional circumstances where this maximum would
be manifestly unreasonable that could justify additional
compensation on termination for loss of variable remuneration
components. Full disclosure on remuneration in event of
dismissal is provided in the Directors’ Remuneration Report.
Best practice provisions II.2.13 and II.2.14: In view of their
detailed specificity and complexity and because of the
confidential or potentially commercially sensitive nature of the
information concerned, individual performance targets and
achievements relevant for variable executive remuneration
will only be disclosed in general terms.
Best practice provision II.3.4 and III.6.3: The disclosure of
transactions where directors have a conflict of interest, as
required by these provisions, shall be qualified to the extent
required under applicable rules and laws pertaining to the
disclosure of price sensitive information, confidentiality and
justified aspects of competition.
Principle III.7: The remuneration of non-executive directors is
determined by the Board in the context of the board
harmonisation with Reed Elsevier PLC and Reed Elsevier Group
plc, having regard for the maximum per annum approved by the
general meeting of shareholders.
Best practice provision IV.1.1: Appointments, suspensions and
removal procedures for executive directors are set out in the
Reed Elsevier NV Corporate Governance Statement 2013. In
order to safeguard the agreed board harmonisation with the
Board of Reed Elsevier PLC, the articles of association of Reed
Elsevier NV provide that a resolution of the General
Shareholders’ Meeting to appoint an executive director other
than in accordance with the proposal of the Board shall require
a majority of at least two thirds of the votes cast if less than
one half of the company’s issued capital is represented at
the meeting. Given the still generally low attendance rate
at shareholders’ meetings in the Netherlands, the Board
believes that this qualified majority requirement is appropriate
for this purpose.
Best practice provision IV.3.1: It is considered impractical and
unnecessary to provide access for shareholders to all
meetings with analysts and all presentations to investors in
real time. Price sensitive and other information relevant to
shareholders is disclosed as required or as appropriate and
made available on the website. Presentations made following
the announcement of the interim and full year results are
simultaneously webcast. Investor seminars are also webcast.
For further information on the application of the Dutch Code,
see the Corporate Governance Statement of Reed Elsevier NV
published on the Reed Elsevier website, www.reedelsevier.com.
The Board
The implementation of the unitary board governance structure at
Reed Elsevier NV was approved at the Annual General Meeting of
Shareholders in April 2013. On 8 May 2013, the articles of
association of Reed Elsevier NV were amended and the unitary
governance structure became effective. Reed Elsevier NV now has
a unitary board comprising both executive and non-executive
directors. At the same time, it was determined that Executive
Board members would become executive directors and members
of the Supervisory Board would become non-executive directors.
The Boards of Reed Elsevier PLC and Reed Elsevier Group plc are
also unitary boards. It is established board practice at Reed
Elsevier NV that the executive and the non-executive directors
meet together.
Significant agreements – change of control
The Governing Agreement between Reed Elsevier NV and Reed
Elsevier PLC states that upon a change of control of Reed Elsevier
NV (for these purposes, the acquisition by a third party of 50% or
more of the issued share capital having voting rights), should there
not be a comparable offer from the offeror for Reed Elsevier PLC,
Reed Elsevier PLC may serve notice upon Reed Elsevier NV varying
certain provisions of the Governing Agreement, including the
governance and the standstill provisions.
There are a number of borrowing agreements including credit
facilities that in the event of a change of control of both Reed
Elsevier NV and Reed Elsevier PLC and, in some cases,
a consequential credit rating downgrade to sub-investment grade
may, at the option of the lenders, require repayment and/or
cancellation as appropriate.
Directors
The following individuals served as directors during the year:
Executive directors
E Engstrom
(Chief Executive Officer)
D Palmer
(Chief Financial Officer)
Non-executive directors
A Habgood (Chairman)
M Elliott (retired 24 April 2013)
W Hauser (appointed 24 April 2013)
A Hennah
L Hook (senior independent director
as of 23 April 2013)
M van Lier Lels
R Polet
Sir David Reid (retired 24 April 2013)
L Sanford
B van der Veer
At the Annual General Meeting held in April 2013, Wolfhart Hauser
was appointed as a non-executive director with effect from
24 April 2013. Mark Elliott and Sir David Reid retired as
non-executive directors at the conclusion of the Annual General
Meeting in April 2013.
In September 2013, Duncan Palmer gave notice of his resignation
as Chief Financial Officer effective as of 25 September 2014 or
such earlier date as Reed Elsevier may designate. The
Nominations Committee retained an external search consultancy
to conduct a search process in conjunction with the Boards to
identify a suitable candidate to succeed Mr Palmer. Following the
conclusion of the search process and on the recommendation of
the Nominations Committee, the Board selected Nick Luff as Chief
Financial Officer. In January 2014, Reed Elsevier announced that
Nick Luff will be appointed to the Boards of Reed Elsevier PLC,
Reed Elsevier Group plc and Reed Elsevier NV as Chief Financial
Officer subject to the approval of shareholders at the Annual
General Meetings in April 2014. The effective date of his
appointment remains to be confirmed but is expected to be no
later than 15 December 2014.
All directors will stand for re-appointment at the Annual General
Meeting in April 2014.
29275_SAS_p177-181 REP SUPBOARD AND EXECBOARD.indd 180
07/03/2014 13:06
Reed Elsevier Annual Reports and Financial Statements 2013
181
Biographical details of the Directors at the date of this report are
given on pages 64 and 65. Details of the remuneration of the
Directors and their interests in the share capital of the company
are provided in the Directors’ Remuneration Report on pages
78 to 94.
Financial statements and accounting records
The financial statements provide a true and fair view of the state of
affairs of the company and the group as of 31 December 2013 and of
the profit or loss in 2013. In preparing the financial statements, the
Board ensures that suitable accounting policies, consistently
applied and supported by reasonable judgements and estimates,
have been used and applicable accounting standards have been
followed. The Board is responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the law. The Board has
general responsibility for taking reasonable steps to safeguard
the assets of the company and to prevent and detect fraud and
other irregularities.
Internal control
As required under sections II.1.4. and II.1.5. of the Dutch Code, the
Audit Committee and the Board have reviewed the effectiveness of
the systems of internal control and risk management during the
last financial year. The objective of these systems is to manage,
rather than eliminate, the risk of failure to achieve business
objectives. Accordingly, they can only provide reasonable, but not
absolute, assurance against material misstatement or loss. The
outcome of this review has been discussed with the external
auditors. The Board confirmed that as regards financial reporting,
the risk management and control systems provide reasonable
assurance against material inaccuracies or loss and have
functioned properly during the financial year.
Directors’ responsibility statement
The Board confirms, to the best of its knowledge, that:
the consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as issued by
the International Accounting Standards Board and as adopted
by the European Union, give a true and fair view of the financial
position and profit or loss of the group; and
the Report of the Board includes a fair review of the
development and performance of the business during the
financial year and the position of the group as at 31 December
2013 together with a description of the principal risks and
uncertainties that it faces.
Neither the company nor the directors accept any liability to any
person in relation to the Annual Report except to the extent that
such liability arises under Dutch law.
Disclosure of information to auditors
As part of the process of approving the company’s 2013 financial
statements, the Board has taken steps to ensure that all relevant
information was provided to the company’s auditors and, so far as
the Board is aware, there is no relevant audit information of which
the company’s auditors are unaware.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Going concern
The Directors, having made appropriate enquiries, consider that
adequate resources exist for the combined businesses to continue
in operational existence for the foreseeable future and that,
therefore, it is appropriate to adopt the going concern basis in
preparing the 2013 financial statements. In reaching this
conclusion, the Directors have had due regard to the combined
businesses’ financial position as at 31 December 2013, the
strong free cash flow of the combined businesses, Reed Elsevier’s
ability to access capital markets and the principal risks facing
Reed Elsevier.
A commentary on the Reed Elsevier combined businesses’ cash
flows, financial position and liquidity for the year ended 31
December 2013 is set out in the Chief Financial Officer’s Report on
pages 52 to 59. This shows that, after taking account of available
cash resources and committed bank facilities that back up short
term borrowings, none of Reed Elsevier’s borrowings fall due
within the next two years. Reed Elsevier’s policies on liquidity,
capital management and management of risks relating to interest
rate, foreign exchange and credit exposures are set out on pages
58 and 59. Further information on liquidity of the combined
businesses can be found in note 18 of the combined financial
statements. The principal risks facing Reed Elsevier are set out on
pages 60 to 62.
Auditors
Resolutions for the re-appointment of Deloitte Accountants BV as
auditors of the company and to authorise the Board to determine
their remuneration will be submitted to the forthcoming Annual
General Meeting on 23 April 2014.
Executive directors
E Engstrom
(Chief Executive Officer)
D Palmer
(Chief Financial Officer)
G
o
v
e
r
n
a
n
c
e
Signed by:
Non-executive directors
A Habgood (Chairman)
W Hauser
A Hennah
L Hook
M van Lier Lels
R Polet
L Sanford
B van der Veer
Registered office
Radarweg 29
1043 NX The Netherlands
Chamber of Commerce Amsterdam
Register file No: 33155037
26 February 2014
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p177-181 REP SUPBOARD AND EXECBOARD.indd 181
07/03/2014 13:06
182
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Share of results of joint ventures
Operating profit
Finance income
Profit before tax
Tax expense
Profit attributable to shareholders
Note
2
11
5
6
2013
€m
(2)
642
640
19
659
(4)
655
Restated
2012
€m
(2)
638
636
8
644
(2)
642
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER
Profit attributable to shareholders
Share of joint ventures’ other comprehensive loss for the year
Total comprehensive income for the year
Earnings per ordinary share
FOR THE YEAR ENDED 31 DECEMBER
Basic earnings per share
Diluted earnings per share
Consolidated statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Cash flows from operating activities
Cash used by operations
Interest received
Tax paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Dividends received from joint ventures
Net cash from investing activities
Cash flows from financing activities
Equity dividends paid
Repurchase of shares
Proceeds on issue of ordinary shares
Decrease/(increase) in net funding balances due from joint ventures
Net cash used in financing activities
2013
€m
655
(48)
607
Restated
2012
€m
642
(121)
521
2013
€
0.91
0.90
Restated
2012
€
0.87
0.87
2013
€m
2012
€m
(3)
19
(1)
15
186
186
(321)
(337)
88
370
(200)
(5)
6
(2)
(1)
754
754
(319)
(141)
18
(313)
(755)
Note
8
8
Note
10
11
7
10
Movement in cash and cash equivalents
1
(2)
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 182
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
183
Consolidated statement of financial position
AS AT 31 DECEMBER
Non–current assets
Investments in joint ventures
Current assets
Amounts due from joint ventures
Cash and cash equivalents
Total assets
Current liabilities
Payables
Taxation
Total liabilities
Net assets
Capital and reserves
Share capital issued
Paid–in surplus
Shares held in treasury (including in joint ventures)
Translation reserve
Other reserves
Total equity
Consolidated statement of changes in equity
Note
2013
€m
2012
€m
11
1,488
1,455
4
2
6
1,494
6
54
60
1,434
55
2,276
(881)
(131)
115
1,434
12
13
14
Note
7
7
Balance at 1 January 2012
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of shares
Share of joint ventures’ increase in share based
remuneration reserve
Share of joint ventures’ settlement of share awards by
the employee benefit trust
Share of joint ventures’ disposal of non–controlling
interests
Equalisation adjustments
Exchange translation differences
Balance at 1 January 2013
Total comprehensive income for the year
Equity dividends paid
Issue of ordinary shares, net of expenses
Repurchase of shares
Share of joint ventures’ increase in share based
remuneration reserve (net of tax)
Share of joint ventures’ settlement of share awards by
the employee benefit trust
Equalisation adjustments
Exchange translation differences
Balance at 31 December 2013
Share
capital
€m
54
–
–
–
–
Paid–in
surplus
€m
2,171
–
–
18
–
Shares held
in treasury
€m
(432)
–
–
–
(141)
Translation
reserves
€m
6
(51)
–
–
–
Other
reserves
€m
(496)
572
(319)
–
–
19
(5)
4
(3)
–
(228)
693
(321)
–
–
–
–
–
–
–
54
–
–
1
–
–
–
–
–
55
–
–
–
–
–
2,189
–
–
87
–
–
5
–
–
(3)
(571)
–
–
–
(337)
–
–
–
–
–
2,276
24
–
3
(881)
–
–
–
–
3
(42)
(86)
–
–
–
–
–
–
(3)
(131)
29
29
(24)
(34)
–
115
–
(34)
–
1,434
4
1
5
1,460
7
51
58
1,402
54
2,189
(571)
(42)
(228)
1,402
Total
equity
€m
1,303
521
(319)
18
(141)
19
–
4
(3)
–
1,402
607
(321)
88
(337)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 183
07/03/2014 13:06
184
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Group accounting policies
These consolidated financial statements, which have been
prepared under the historical cost convention, report the
consolidated statements of income, comprehensive income,
cash flow, financial position and changes in equity of
Reed Elsevier NV (incorporated and domiciled in the Netherlands).
Unless otherwise indicated, all amounts shown in the
financial statements are in millions of euros.
As required by a regulation adopted by the European Parliament,
the consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and as issued by the
International Accounting Standards Board (IASB).
The consolidated financial statements are prepared on a going
concern basis, as explained on page 181.
The Reed Elsevier combined financial statements presented in
pounds sterling on pages 97 to 139 form an integral part of the
notes to Reed Elsevier NV’s statutory financial statements. The
primary combined financial statements and selected notes are
presented in euros on pages 142 to 154.
As a consequence of the merger of the company’s businesses
with those of Reed Elsevier PLC, described on page 69, the
shareholders of Reed Elsevier NV and Reed Elsevier PLC can be
regarded as having the interests of a single economic group,
enjoying substantially equivalent ordinary dividend and capital
rights in the earnings and net assets of the Reed Elsevier
Combined Businesses. The Combined Businesses are composed
of Reed Elsevier Group plc and Elsevier Reed Finance BV and their
respective subsidiaries and joint ventures, together with the two
parent companies, Reed Elsevier NV and Reed ElsevierPLC. The
Combined Businesses are jointly controlled by Reed Elsevier NV
and Reed Elsevier PLC.
The Reed Elsevier NV consolidated financial statements are
presented incorporating Reed Elsevier NV’s investments in the
Reed Elsevier Combined Businesses accounted for using the
equity method, as adjusted for the effects of the equalisation
arrangement between Reed Elsevier NV and Reed Elsevier PLC.
The arrangement lays down the distribution of dividends and net
assets in such a way that Reed Elsevier NV’s share in the profit
and net assets of the Reed Elsevier Combined Businesses equals
50%, with all settlements accruing to shareholders from the
equalisation arrangements taken directly to reserves.
Because the dividend paid to shareholders by Reed Elsevier NV is
equivalent to the Reed Elsevier PLC dividend plus, other than in
special circumstances, the UK tax credit received by certain Reed
Elsevier PLC shareholders, Reed Elsevier NV normally distributes
a higher proportion of the combined profit attributable than Reed
Elsevier PLC. Reed Elsevier PLC’s share in this difference in
dividend distributions is settled with Reed Elsevier NV and is
credited directly to consolidated reserves under equalisation.
Reed Elsevier NV can pay a nominal dividend on its R shares held
by a subsidiary of Reed Elsevier PLC that is lower than the dividend
on the ordinary shares. Equally, Reed Elsevier NV has the
possibility to receive dividends directly from Dutch affiliates.
Reed Elsevier PLC is compensated by direct dividend payments by
Reed Elsevier Group plc. The settlements flowing from these
arrangements are also taken directly to consolidated reserves
under equalisation.
Combined financial statements
The accounting policies adopted in the preparation of the
combined financial statements are set out on pages 102 to 107.
Basis of valuation of assets and liabilities
Reed Elsevier NV’s 50% economic interest in the net assets of the
combined businesses has been shown on the consolidated
statement of financial position as investments in joint
ventures, net of the assets and liabilities reported as part of
Reed Elsevier NV. Joint ventures are accounted for using the
equity method.
Cash and cash equivalents are stated at fair value. Other assets
and liabilities are stated at historical cost, less provision, if
appropriate, for any impairment in value.
Foreign exchange translation
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the transaction. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at the rate prevailing on the statement of financial
position date. Exchange differences arising are recorded in the
income statement. The gains or losses relating to the
retranslation of Reed Elsevier NV’s 50% interest in the net assets
of the combined businesses are classified as equity and
transferred to the translation reserve.
When foreign operations are disposed of, the related cumulative
translation differences are recognised within the income
statement in the period.
Taxation
Tax expense comprises current and deferred tax. Current and
deferred tax are charged or credited in the income statement
except to the extent that the tax arises from a transaction or event
which is recognised, in the same or a different period, outside
profit or loss (either in other comprehensive income, directly
in equity, or through a business combination) in which case the
tax appears in the same statement as the transaction that gave
rise to it.
Current tax is the amount of corporate income taxes payable or
recoverable based on the profit for the period as adjusted for items
that are not taxable or not deductible, and is calculated using tax
rates and laws that were enacted or substantively enacted at the
date of the statement of financial position. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. Provisions are established where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the statement of financial position. Deferred tax is
calculated using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period, and which
are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 184
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
185
Deferred tax liabilities are generally recognised for all taxable
temporary differences but not recognised for taxable temporary
differences arising on investments in subsidiaries, associates and
joint ventures where the reversal of the temporary difference can
be controlled and it is probable that the difference will not reverse
in the foreseeable future. Deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that
taxable profits will be available against which the deductible
temporary differences can be utilised; and reviewed at the end of
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of
temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Deferred tax is not discounted.
Critical judgements and key sources of estimation uncertainty
Critical judgements in the preparation of the combined financial
statements are set out on pages 105 to 106.
Standards and amendments effective for the year
As described on page 106, of the combined accounts, the
combined businesses adopted IAS19 Employee Benefits (revised)
with effect from 1 January 2013. As required under the revised
standard, comparative figures have been restated. For the year
ended 31 December 2012, Reed Elsevier NV’s share of results of
joint ventures is €16m lower and basic earnings per share is €0.03
lower than previously reported. On an adjusted basis earnings per
share is €0.01 lower than previously reported.
With effect from 1 January 2013, the combined businesses
also adopted various other standards, interpretations and
amendments to IFRS, none of which have had a significant
impact on Reed Elsevier’s accounting policies or reporting.
Standards, amendments and interpretations not yet effective
Recently issued standards, amendments and interpretations and
their impact on future accounting policies and reporting have been
considered on page 107 of the combined financial statements.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 185
07/03/2014 13:06
186
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2013
1 Basis of preparation
The consolidated financial statements of Reed Elsevier NV reflect the 50% economic interest that its shareholders have under the
equalisation arrangements in the Reed Elsevier combined businesses, accounted for on an equity basis.
The Reed Elsevier combined financial statements are presented in pounds sterling, which is the functional currency of Reed Elsevier
Group plc, a UK registered company which owns the publishing and information businesses of Reed Elsevier. The following analysis
presents how the consolidated financial statements of Reed Elsevier NV, presented in euros, are derived from the Reed Elsevier
combined financial statements.
REED ELSEVIER NV CONSOLIDATED PROFIT ATTRIBUTABLE TO SHAREHOLDERS
Reed Elsevier combined businesses net profit attributable to parent company shareholders in
pounds sterling
Reed Elsevier combined businesses net profit attributable to parent company shareholders in
pounds sterling translated into euros at average exchange rates
Reed Elsevier combined businesses net profit attributable to parent company shareholders in euros
Reed Elsevier NV’s 50% share of combined net profit attributable to shareholders
REED ELSEVIER NV CONSOLIDATED TOTAL EQUITY
Reed Elsevier combined shareholders’ equity in pounds sterling
Reed Elsevier combined shareholders’ equity in pounds sterling translated into euros at year end
exchange rates
Reed Elsevier NV’s 50% share of combined equity
2013
Restated
2012
£1,110m £1,044m
€1,310m €1,284m
€1,310m €1,284m
€642m
€655m
2013
2012
£2,390m £2,280m
€2,868m €2,804m
€1,434m €1,402m
2 Administrative expenses
Administrative expenses include the remuneration for present and former Directors of Reed Elsevier NV in respect of services rendered
to Reed Elsevier NV and the combined businesses. Fees for Non–Executive Directors of Reed Elsevier NV of €0.3m (2012: €0.3m) are
included in remuneration. Insofar as remuneration is related to services rendered to Reed Elsevier Group plc group and Elsevier Reed
Finance BV group, it is borne by these groups. Reed Elsevier NV has no employees (2012: nil).
3 Auditor’s remuneration
Audit fees payable by Reed Elsevier NV were €129,000 (2012: €126,000). Further information on the audit and non audit fees paid
by the Reed Elsevier combined businesses to Deloitte Accountants B.V. and its associates is set out in note 3 to the combined
financial statements.
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 186
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
187
4 Related party transactions
All transactions with joint ventures, which are related parties of Reed Elsevier NV, are reflected in these financial statements.
Key management personnel are also related parties and comprise the Directors of Reed Elsevier NV. The remuneration of key
management personnel are set out in note 29 to the combined financial statements.
5 Finance income
Finance income from joint ventures
6 Taxation
2013
€m
19
2012
€m
8
A reconciliation of the notional tax charge based on the applicable rate of tax to the actual total tax expense is set out below:
Profit before tax
Tax at applicable rate: 25% (2012: 25%)
Tax at applicable rate on share of results of joint ventures
Other
Tax expense
7 Equity dividends
ORDINARY DIVIDENDS PAID IN THE YEAR
Ordinary shares:
Final for prior financial year
Interim for financial year
Total
R shares
2013
€m
659
(165)
161
–
(4)
2013
€m
230
91
321
Restated
2012
€m
644
(161)
159
–
(2)
2012
€m
228
91
319
–
2013
€
2012
€
€0.337
€0.132
€0.469
€0.326
€0.130
€0.456
–
The Board of Reed Elsevier NV has proposed a final dividend of €0.374 (2012: €0.337). The cost of funding the proposed final dividend
is expected to be €252m. No liability has been recognised at the statement of financial position date.
ORDINARY DIVIDENDS PAID AND PROPOSED RELATING TO THE FINANCIAL YEAR
Ordinary shares:
Interim (paid)
Final (proposed)
Total
R shares
2013
€
2012
€
€0.132
€0.374
€0.506
–
€0.130
€0.337
€0.467
–
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 187
07/03/2014 13:06
188
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2013
8 Earnings per ordinary share (“EPS”)
Basic earnings per share
Diluted earnings per share
2013
2012
Weighted
average
number of
shares
(millions)
717.6
726.9
Earnings
€m
655
655
EPS
€
0.91
0.90
Weighted
average
number of
shares
(millions)
734.0
742.1
Restated
Earnings
€m
Restated
EPS
€
642
642
0.87
0.87
The diluted EPS figures are calculated after taking account of the effect of potential additional ordinary shares arising from share
options and conditional shares.
The weighted average number of shares reflects the equivalent ordinary shares amount taking into account the R shares and is after
deducting shares held in treasury. Movements in the number of ordinary shares or equivalents for the year ended 31 December 2013
are shown below.
NUMBER OF ORDINARY SHARES OR EQUIVALENTS
Year ended 31 December
At start of year
Issue of ordinary shares
Repurchase of ordinary and R shares
Net release of shares by the employee benefit trust
At end of year
Weighted average number of equivalent ordinary shares during the year
Ordinary
shares in
issue
(millions)
726.0
8.1
–
–
734.1
R shares in
issue
(millions)
Treasury
shares
(millions)
43.0
–
–
–
43.0
(44.2)
–
(25.2)
2.0
(67.4)
2013
Ordinary
share
equivalents
net of
treasury
shares
(millions)
2012
Ordinary
share
equivalents
net of
treasury
shares
(millions)
724.8
8.1
(25.2)
2.0
709.7
717.6
735.8
1.9
(13.3)
0.4
724.8
734.0
The average number of equivalent ordinary shares takes into account the R shares in the company held by a subsidiary of
Reed Elsevier PLC, which represents a 5.8% interest in the company’s share capital.
At 31 December 2013 treasury shares included 156,394 R shares (2012: 62,341), equivalent to 1,563,940 Reed Elsevier NV ordinary shares
(2012: 623,410).
At 31 December 2013, 4,146,785 R shares (2012: 4,240,838) were held by a subsidiary of Reed Elsevier PLC . The R shares are convertible
at the election of the holders into ten ordinary shares each and each R share carries an entitlement to cast ten votes. They have
otherwise the same rights as the ordinary shares, except that Reed Elsevier NV may pay a lower dividend on the R shares.
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 188
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
189
9 Adjusted figures
Adjusted profit and earnings per share figures are used by management as additional performance measures. The adjusted figures are
derived as follows:
Reported figures
Share of adjustments in joint ventures:
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Adjusted figures
Profit attributable to
shareholders
Basic earnings
per share
2013
€m
655
192
18
8
11
(177)
–
707
Restated
2012
€m
642
207
10
5
(64)
(52)
(59)
689
2013
€
0.91
0.27
0.03
0.01
0.02
(0.25)
–
0.99
Restated
2012
€
0.87
0.28
0.02
0.01
(0.09)
(0.07)
(0.08)
0.94
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
10 Statement of cash flows
RECONCILIATION OF ADMINISTRATIVE EXPENSES TO CASH USED BY OPERATIONS
Administrative expenses
Net movement in payables
Cash used by operations
RECONCILIATION OF NET FUNDING BALANCES DUE FROM JOINT VENTURES
At start of year
Cash flow
At end of year
2013
€m
(2)
(1)
(3)
2013
€m
1,397
(370)
1,027
2012
€m
(2)
(3)
(5)
2012
€m
1,084
313
1,397
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 189
07/03/2014 13:06
190
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2013
11 Investments in joint ventures
Share of results of joint ventures
Share of joint ventures’ other comprehensive loss
Share of joint ventures’ disposal of non–controlling interests
Share of joint ventures’ increase in share based remuneration reserve (net of tax)
Equalisation adjustments
Dividends received from joint ventures
(Decrease)/increase in net funding balances due from joint ventures
Net movement in the year
At start of year
At end of year
2013
€m
642
(48)
–
29
(34)
(186)
(370)
33
1,455
1,488
Restated
2012
€m
638
(121)
4
19
(3)
(754)
313
96
1,359
1,455
During the year the company received dividends of €186m from Elsevier Reed Finance BV.
Summarised information showing total amounts in respect of joint ventures and Reed Elsevier NV shareholders’ 50% share is set
out below:
Revenue
Net profit for the year
Total joint ventures
Reed Elsevier NV
shareholders’ share
2013
€m
7,121
1,316
Restated
2012
€m
7,523
1,290
2013
€m
3,561
642
Restated
2012
€m
3,762
638
Reed Elsevier NV’s share of joint ventures’ net profit attributable to parent company shareholders for the year excludes the net profit
that arose directly in Reed Elsevier NV of €13m (2012: €4m).
Reed Elsevier NV’s other comprehensive income includes a loss of €48m (2012: €121m) relating to joint ventures.
Total assets
Total liabilities
Net assets
Attributable to:
Joint ventures
Non–controlling interests
Net funding balances due from joint ventures
Total
Total joint ventures
Reed Elsevier NV
shareholders’ share
2013
€m
12,594
(9,686)
2,908
2,868
40
2,908
2012
€m
13,547
(10,701)
2,846
2,804
42
2,846
2013
€m
6,295
(5,834)
461
461
–
461
1,027
1,488
2012
€m
6,773
(6,715)
58
58
–
58
1,397
1,455
The above amounts for Reed Elsevier NV’s shareholders share of total assets and total liabilities exclude assets and liabilities held
by Reed Elsevier NV, but include the counterparty balances of amounts owed to and by other Reed Elsevier businesses. Included
within Reed Elsevier NV’s share of assets and liabilities are cash and cash equivalents of €77m (2012: €393m) and borrowings of
€1,963m (2012: €2,386m) respectively.
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 190
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
191
12 Payables
Included within payables are employee convertible debenture loans of €5m (2012: €7m) with a weighted average interest rate of 1.95%
(2012: 2.65%). Depending on the conversion terms, the surrender of €200 par value debenture loans qualifies for 50 Reed Elsevier NV
ordinary shares.
13 Share capital and shares held in treasury
AUTHORISED
Ordinary shares of €0.07 each
R shares of €0.70 each
Total
ISSUED AND FULLY PAID
At 1 January 2012
Issue of ordinary shares
At 1 January 2013
Issue of ordinary shares
At 31 December 2013
No. of shares
1,800,000,000
26,000,000
R shares
number
4,303,179
–
4,303,179
–
4,303,179
Ordinary
shares
number
724,077,755
1,906,470
725,984,225
8,165,731
734,149,956
R shares
€m
3
–
3
–
3
Ordinary
shares
€m
51
–
51
1
52
€m
126
18
144
Total
€m
54
–
54
1
55
The issue of shares relates to the exercise of share options. Details of share option and conditional share schemes are set out in note 6 to
the Reed Elsevier combined financial statements.
At 31 December 2013, 4,146,785 (2012: 4,240,838) R shares were held by a subsidiary of Reed Elsevier PLC. The R shares are convertible
at the election of the holders into ten ordinary shares each and each R share carries an entitlement to cast ten votes. They have
otherwise the same rights as the ordinary shares, except that Reed Elsevier NV may pay a lower dividend on the R shares.
At 31 December 2013, shares held in treasury related to 4,992,360 (2012: 6,990,101) Reed Elsevier NV ordinary shares held by the
Reed Elsevier Group plc Employee Benefit Trust (EBT); and 60,895,193 (2012: 36,613,087) Reed Elsevier NV ordinary shares and
156,394 R shares (2012: 62,341) held by the parent company.
The EBT purchases Reed Elsevier NV shares which, at the trustees’ discretion, can be used in respect of the exercise of share options
and to meet commitments under conditional share awards. At 31 December 2013, Reed Elsevier NV shares held by the EBT were €56m
(2012: €84m) at cost.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 191
07/03/2014 13:06
192
FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the consolidated financial statements
for the year ended 31 December 2013
14 Other reserves
At start of year
Profit attributable to shareholders
Share of joint ventures’:
Actuarial gains/(losses) on defined benefit pension schemes
Transfer to net profit on disposal of available for sale investments
Fair value movements on cash flow hedges
Tax recognised in other comprehensive income
Increase in share based remuneration reserve (net of tax)
Settlement of share awards
Transfer to net profit from cash flow hedge reserve (net of tax)
Disposal of non-controlling interests
Equalisation adjustments
Equity dividends paid
At end of year
15 Contingent liabilities
There are contingent liabilities in respect of borrowings of joint ventures guaranteed by Reed Elsevier NV as follows:
Guaranteed jointly and severally with Reed Elsevier PLC
2013
€m
(228)
655
24
–
38
(23)
29
(24)
(1)
–
(34)
(321)
115
Restated
2012
€m
(496)
642
(180)
7
43
47
19
(5)
13
4
(3)
(319)
(228)
2013
€m
2012
€m
3,676
4,422
Financial instruments disclosures in respect of the borrowings covered by the above guarantees are given in note 18 to the Reed Elsevier
combined financial statements.
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 192
07/03/2014 13:06
•
•
•
Reed Elsevier Annual Reports and Financial Statements 2013
16 Principal joint ventures
Reed Elsevier Group plc
Incorporated and operating in Great Britain
1–3 Strand
London WC2N 5JR
Holding company for operating businesses involved in science
& medical, risk management, legal and business publishing and
organisation of trade exhibitions
Elsevier Reed Finance BV
Incorporated in the Netherlands
Radarweg 29
1043 NX Amsterdam, the Netherlands
Holding company for financing businesses
18,385 ordinary R shares
18,385 ordinary E shares
100,000 7.5% cumulative preference non voting shares
Equivalent to a 50% equity interest
133 ordinary R shares
205 ordinary E shares
Equivalent to a 61% equity interest
193
% holding
–
100%
–
–
100%
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
The R shares in Reed Elsevier Group plc and Elsevier Reed Finance BV and the non–voting preference shares in Reed Elsevier Group plc
are owned by Reed Elsevier PLC.
In addition, Reed Elsevier NV holds shares with special dividend rights in Reed Elsevier Overseas BV, a subsidiary of Reed Elsevier
Group plc with registered offices in Amsterdam. These shares are included in the amount shown under investments in joint ventures
and enable Reed Elsevier NV to receive dividends from companies within the same tax jurisdiction.
A list of companies within Reed Elsevier is filed with the Amsterdam Chamber of Commerce in the Netherlands.
17 Approval of financial statements
The consolidated financial statements were signed and authorised for issue by the Board of Directors on 26 February 2014.
A J Habgood
Chairman of the Board
D J Palmer
Chief Financial Officer
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p182-193 CONSOLID INC STATEMNT.indd 193
07/03/2014 13:06
194 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Parent company profit and loss account
FOR THE YEAR ENDED 31 DECEMBER
Administrative expenses
Dividends received from joint ventures
Finance income from joint ventures
Tax expense
Profit attributable to ordinary shareholders
Parent company balance sheet
AS AT 31 DECEMBER
Fixed assets
Investments in joint ventures
Current assets
Amounts due from joint ventures – funding
Amounts due from joint ventures – other
Cash
Creditors: amounts falling due within one year
Taxation
Other creditors
Net current assets
Net assets
Capital and reserves
Share capital issued
Paid-in surplus
Shares held in treasury
Other reserves
Reserves
Shareholders’ funds
2013
€m
(2)
186
19
(4)
199
2012
€m
(2)
754
8
(2)
758
Note
2013
€m
2012
€m
3,606
3,604
1
1,027
4
1,031
2
1,033
(54)
(6)
(60)
973
4,579
55
2,276
(814)
195
2,867
4,579
1,397
4
1,401
1
1,402
(51)
(7)
(58)
1,344
4,948
54
2,189
(477)
193
2,989
4,948
The parent company financial statements were signed and authorised for issue by the Board of Directors on 26 February 2014.
A J Habgood
Chairman of the Board
D J Palmer
Chief Financial Officer
29275_SAS_p194-196 PARENT CO INFO.indd 194
07/03/2014 12:07
Reed Elsevier Annual Reports and Financial Statements 2013
Parent company reconciliation of shareholders’ funds
At 1 January 2012
Profit attributable to shareholders
Equity dividends paid
Repurchase of shares
Issue of shares, net of expenses
Equity instruments granted to employees of combined businesses
At 1 January 2013
Profit attributable to shareholders
Equity dividends paid
Repurchase of shares
Issue of shares, net of expenses
Equity instruments granted to employees of combined businesses
At 31 December 2013
Share
capital
issued
€m
Paid-in
surplus (
€m
i)
Shares
held in
treasury
€m
Other
reserves (ii)
€m
Reserves
(iii)
€m
54
–
–
–
–
–
54
–
–
–
1
–
55
2,171
–
–
–
18
–
2,189
–
–
–
87
–
2,276
(336)
–
–
(141)
–
–
(477)
–
–
(337)
–
–
(814)
191
–
–
–
–
2
193
–
–
–
–
2
195
2,550
758
(319)
–
–
–
2,989
199
(321)
–
–
–
2,867
195
Total
€m
4,630
758
(319)
(141)
18
2
4,948
199
(321)
(337)
88
2
4,579
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
(i) Within paid–in surplus, an amount of €2,099m (2012: €2,012m) is free of tax.
(ii)
Other reserves relate to equity instruments granted to employees of the combined businesses under share based remuneration
arrangements. Other reserves do not form part of free reserves.
(iii) Free reserves of the company at 31 December 2013 were €4,329m (2012: €4,701m), comprising reserves and paid–in surplus less
shares held in treasury.
Parent company accounting policies
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
Basis of preparation
The parent company financial statements have been prepared
under the historical cost convention. As permitted by 2:362
subsection 1 of the Dutch Civil Code for companies with
international operations, the parent company financial statements
have been prepared in accordance with UK Generally Accepted
Accounting Practice (UK GAAP), ensuring consistency. The
financial information relating to the company is recognised in the
consolidated financial statements.
The parent company financial statements are prepared on a going
concern basis, as explained on page 181.
The Reed Elsevier NV accounting policies under UK GAAP are set
out below.
Investments
Fixed asset investments in the combined businesses are stated at
cost, less provision, if appropriate, for any impairment in value.
The fair value of the award of share options and conditional
shares over Reed Elsevier NV ordinary shares to employees of
the Reed Elsevier combined businesses are treated as a capital
contribution.
Principal joint ventures are set out in note 11 of the Reed Elsevier NV
consolidated financial statements.
Short term investments are stated at the lower of cost and net
realisable value. Other assets and liabilities are stated at
historical cost, less provision, if appropriate, for any impairment
in value.
G
o
v
e
r
n
a
n
c
e
Shares held in treasury
The amount of consideration paid, including directly attributable
costs, for shares repurchased is recognised as shares held in
treasury and presented as a deduction from total equity. Details of
share capital and shares held in treasury are set out in note 13 of
the Reed Elsevier NV consolidated financial statements and
note 27 of the Reed Elsevier combined financial statements.
Foreign exchange translation
Transactions entered into in foreign currencies are recorded at
the exchange rates applicable at the time of the transaction.
Taxation
Deferred taxation is provided in full for timing differences using
the liability method. Deferred tax assets are only recognised to the
extent that they are considered recoverable in the short term.
Deferred taxation balances are not discounted.
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p194-196 PARENT CO INFO.indd 195
07/03/2014 12:07
196 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER NV
Notes to the parent company financial statements
1 Other creditors
Other creditors include €5m (2012: €7m) of employee convertible debenture loans with a weighted average interest rate of 1.95%
(2012: 2.65%). Depending on the conversion terms, the surrender of €200 par value debenture loans qualifies for 50 Reed Elsevier NV
ordinary shares.
2 Reconciliations to consolidated financial statements
A reconciliation of the parent company profit attributable to ordinary shareholders prepared under UK GAAP and the consolidated profit
attributable to ordinary shareholders prepared under IFRS and presented under the equity method is provided below:
YEAR ENDED 31 DECEMBER
Parent company profit attributable to shareholders
Share of results of joint ventures
Dividends received from joint ventures
Consolidated profit attributable to shareholders using the equity method
2013
€m
199
642
(186)
655
Restated
2012
€m
758
638
(754)
642
A reconciliation between the parent company shareholders’ funds prepared under UK GAAP and the consolidated shareholders’ funds
prepared under IFRS and presented under the equity method is provided below:
AS AT 31 DECEMBER
Parent company shareholders’ funds
Cumulative share of results of joint ventures less cumulative dividends received from joint ventures
Cumulative currency translation adjustments
Cumulative equalisation and other adjustments
Share of treasury shares held by joint ventures’ employee benefit trust
Share of IFRS adjustments in joint ventures
Equity instruments granted to employees of combined businesses
Consolidated shareholders’ funds using the equity method
2013
€m
4,579
(1,971)
(351)
41
(67)
(602)
(195)
1,434
2012
€m
4,948
(2,427)
(262)
32
(94)
(602)
(193)
1,402
3 Other matters
Transactions with Directors including share based remuneration costs are set out in note 29 to the combined financial statements and
details of the directors’ remuneration are included in the directors’ remuneration report on pages 78 to 94.
Additional information
R shares
Reed Elsevier NV has two types of shares: ordinary shares of €0.07 nominal value and R shares of €0.70 nominal value. Each R share is
convertible into 10 ordinary shares and is entitled to cast 10 votes. Otherwise it has the same rights as an ordinary share, except that
Reed Elsevier NV may pay a lower dividend on it, but not less than 1% of the nominal value of an R share.
Profit allocation
The Articles of Association provide that distributions of dividend may only be made insofar as the company’s equity exceeds the amount of
the paid in capital, increased by the reserves which must be kept by virtue of the law and may be made in cash or in shares, at the proposal of
the Board. Distribution of dividends on ordinary shares and on the class R shares shall be made in proportion to the nominal value of each
share. The Board may resolve that the dividend to be paid on each class R share shall be lower than the dividend to be paid on each ordinary
share, resolving at the same time what amount of dividend shall be paid on each ordinary share and each class R share, respectively.
PROPOSAL FOR ALLOCATION OF PROFIT
Final dividend on ordinary shares for prior financial year
Interim dividend on ordinary shares for financial year
Dividend on R shares
Retained (loss)/ profit
Total
2013
€m
230
91
–
(122)
199
2012
€m
228
91
–
439
758
29275_SAS_p194-196 PARENT CO INFO.indd 196
07/03/2014 12:07
Reed Elsevier Annual Reports and Financial Statements 2013
197
Independent auditor’s report to the shareholders of Reed Elsevier NV
Opinion on our audit of the consolidated and parent company
financial statements of Reed Elsevier NV (“the Company”)
In our opinion:
The financial statements give a true and fair view of the state of
the Company’s affairs as at 31 December 2013 and of its profit
and its cash flows for the year then ended;
the consolidated financial statements have been properly
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and in
accordance with Part 9 of Book 2 of the Dutch Civil Code; and
the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice and in accordance with Part 9 of
Book 2 of the Dutch Civil Code.
We have audited the consolidated financial statements which
comprise the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement
of cash flows, the consolidated statement of financial position and
the consolidated statement of changes in equity and the related
notes 1 to 17, including a summary of the significant accounting
policies. The financial reporting framework that has been applied
in the preparation of the consolidated financial statements is
applicable law and IFRSs as adopted by the European Union. The
parent company financial statements comprise the parent
company profit and loss account, the parent company balance
sheet, the parent company reconciliation of shareholders’ funds,
a summary of the parent company significant accounting policies
and the related notes 1 to 3. The financial reporting framework
that has been applied in the preparation of the parent company
financial statements is applicable Dutch law and United Kingdom
Accounting Standards.
Our assessment of risks of material misstatement, application
of materiality and overview of the scope of our audit
Given the nature of the Reed Elsevier PLC and Reed Elsevier NV
legal structure, our assessed risks of material misstatement,
application of materiality and overview of the scope of our audit for
the combined business equally applies to the audit of the
consolidated and parent company financial statements of Reed
Elsevier NV. See page 138 for further details.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ responsibilities
statement, the Board is responsible for the preparation of the
financial statements in accordance with IFRSs as adopted by the
European Union and for being satisfied that they give a true and fair
view and for such internal control as they determine is necessary
to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with Dutch Law, including the
Dutch Standards on Auditing. The standards require us to comply
with our respective Dutch professions’ ethical requirements,
including the International Ethical Standards Board of
Accountants Code of Ethics. We are independent of the Company
within the meaning of the relevant Dutch ethical requirements and
have fulfilled our other responsibilities under those ethical
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
We are required to communicate with the Audit Committee
regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We are also required to provide the Audit Committee with a
statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable related safeguards.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error, and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Dutch Law
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these consolidated and parent company financial
statements.
As part of an audit in accordance with Dutch law, we exercise
professional judgement and maintain professional scepticism
throughout the planning and performance of the audit. We also
identify and assess the risks of material misstatement of the
consolidated and parent company financial statements, whether
due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
In making those risk assessments, the auditor considers internal
control relevant to the entity's preparation and fair presentation of
the financial statements in order to design audit procedures that
are appropriate in the circumstances. An audit also includes an
assessment of: whether the accounting policies are appropriate to
the businesses’ circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the Board; and the overall
presentation structure and content of the financial statements,
including the disclosures and whether the financial statements
represent the underlying transactions and events in a manner that
achieves fair presentation. We obtain sufficient appropriate audit
evidence regarding the financial information of the Company and
business activities to express an opinion on the financial
statements. We are responsible for the direction, supervision and
performance of the audit. We remain solely responsible for our
audit opinion. In addition, we read all the financial and
non-financial information in the annual report to identify material
inconsistencies with the audited financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we
consider the implications for our report.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p197-198.indd 197
07/03/2014 13:07
198 FINANCIAL STATEMENTS AND OTHER INFORMATION
Going concern
The financial statements of the Company have been prepared
using the going concern basis of accounting. The use of this basis
of accounting is appropriate unless management either intends to
liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
We have reviewed the Report of the Board on page 76 where the
Board has not identified a material uncertainty that may cast
significant doubt on the Company’s ability to continue as a going
concern. We confirm that given the nature of the Reed Elsevier
PLC and Reed Elsevier NV legal structure, our assessment of the
combined businesses’ ability to continue as a going concern
equally applies to the parent company and the consolidated
financial statements of Reed Elsevier NV.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Company’s
ability to continue as a going concern.
Other legal and regulatory requirements
Pursuant to the legal requirement under Section 2:393 sub 5 at e
and f of the Dutch Civil Code, we have no deficiencies to report as a
result of our examination whether the Report of the Board, to the
extent we can assess, has been prepared in accordance with Part
9 of Book 2 of this Code, and whether the information as required
under Section 2:392 sub 1 at b-h has been annexed. Further we
report that the Report of the Board, to the extent we can assess, is
consistent with the financial statements as required by Section
2:391 sub 4 of the Dutch Civil Code.
Deloitte Accountants B.V.
A Sandler
Amsterdam
The Netherlands
26 February 2014
29275_SAS_p197-198.indd 198
07/03/2014 13:07
Reed Elsevier Annual Reports and Financial Statements 2012
199
5 year summary
Combined financial information
Revenue
Reported operating profit
Adjusted operating profit
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reed Elsevier NV consolidated financial information
Reported net profit attributable to shareholders
Adjusted net profit attributable to shareholders
Reported earnings per ordinary share (€)
Adjusted earnings per ordinary share (€)
Dividend per ordinary share (€)
IAS19 (revised)(3)
2013
€m
2012
€m
Note
As reported
2012
€m
2011
€m
2010
€m
2009
€m
7,121
1,624
2,064
1,310
1,413
655
707
€0.91
€0.99
€0.506
1
1
2
7,523
1,639
2,076
1,284
1,379
642
689
€0.87
€0.94
€0.467
7,523
1,670
2,107
1,315
1,400
658
700
€0.90
€0.95
€0.467
6,902
1,386
1,870
874
1,219
437
610
€0.59
€0.83
€0.436
7,084
1,275
1,819
751
1,150
376
575
€0.51
€0.78
€0.412
6,800
881
1,758
438
1,099
219
550
€0.32
€0.79
€0.400
(1) Adjusted figures are presented as additional performance measures used by management and are stated before amortisation and
impairment of acquired intangible assets and goodwill, the net financing cost on defined benefit pension schemes, exceptional
restructuring (2008 - 2010) and acquisition related costs, exceptional prior year tax credits (in 2012 only), and in respect of
attributable net profit, reflect a tax rate that excludes the effect of movements in deferred taxation assets and liabilities that are not
expected to crystallise in the near term and includes the benefit of tax amortisation where available on acquired goodwill and
intangible assets. Acquisition related financing costs and profit and loss from disposal gains and losses and other non operating
items are also excluded from the adjusted figures.
(2) Dividend per ordinary share is based on the interim dividend and proposed final dividend for the relevant year.
(3) Comparative figures for 2012 have been restated following the adoption of IAS19 Employee Benefits (revised).
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p199 5YR SUMMARY.indd 199
07/03/2014 12:09
29275_SAS_p200-205 OTHER INFO.indd 200
07/03/2014 12:10
Reed Elsevier Annual Reports and Financial Statements 2013
201
Other
information
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
In this section
Additional information for US Investors
202 Reed Elsevier combined businesses
204 Reed Elsevier PLC
205 Reed Elsevier NV
Shareholder information
206 Shareholder information
209 Contacts
210 2014 financial calendar
Principal operating locations
211 Principal operating locations
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p200-205 OTHER INFO.indd 201
07/03/2014 12:10
202 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER COMBINED BUSINESSES
Reed Elsevier combined businesses
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the Reed Elsevier combined financial statements into US dollars at
the stated rates of exchange. The financial information provided below is prepared under IFRS as used in the preparation of the
Reed Elsevier combined financial statements. It does not represent a restatement under US GAAP which would be different in
some significant respects.
EXCHANGE RATES FOR TRANSLATION
US dollars to sterling
Income statement
Statement of financial
position
2013
1.56
2012
1.59
2013
1.66
2012
1.62
Combined income statement
FOR THE YEAR ENDED 31 DECEMBER
Revenue
Operating profit
Profit before tax
Net profit attributable to parent companies’ shareholders
Adjusted operating profit
Adjusted profit before tax
Adjusted net profit attributable to parent companies’ shareholders
2013
US$m
9,415
2,147
1,866
1,732
2,728
2,452
1,867
Restated
2012
US$m
9,724
2,119
1,830
1,660
2,684
2,340
1,782
29275_SAS_p200-205 OTHER INFO.indd 202
07/03/2014 12:10
Reed Elsevier Annual Reports and Financial Statements 2013
Combined statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Decrease in cash and cash equivalents
Movement in cash and cash equivalents
At start of year
Decrease in cash and cash equivalents
Exchange translation differences
At end of year
Adjusted operating cash flow
Combined statement of financial position
AS AT 31 DECEMBER
Non-current assets
Current assets
Assets held for sale
Total assets
Current liabilities
Non-current liabilities
Liabilities associated with assets held for sale
Total liabilities
Net assets
203
2012
US$m
2,237
(757)
(1,594)
(114)
1,125
(114)
27
1,038
2,549
2012
US$m
13,738
3,624
481
17,843
6,347
7,591
156
14,094
3,749
2013
US$m
2,162
(493)
(2,499)
(830)
1,038
(830)
11
219
2,657
2013
US$m
14,376
3,011
35
17,422
6,395
7,000
5
13,400
4,022
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p200-205 OTHER INFO.indd 203
07/03/2014 12:10
204 FINANCIAL STATEMENTS AND OTHER INFORMATION
REED ELSEVIER PLC
Reed Elsevier PLC
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the Reed Elsevier PLC consolidated financial statements into US dollars at
the stated rates of exchange. The financial information provided below is prepared under IFRS as used in the preparation of the Reed
Elsevier PLC consolidated financial statements. It does not represent a restatement under US GAAP which would be different in some
significant respects.
EXCHANGE RATES FOR TRANSLATION OF STERLING ($:£1)
Income statement
Statement of financial position
2013
US$:£
1.56
1.66
2012
US$:£
1.59
1.62
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Profit attributable to ordinary shareholders
Adjusted profit attributable to 52.9% interest in Reed Elsevier combined businesses
Share of joint ventures’:
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Profit attributable to 52.9% interest in Reed Elsevier combined businesses
2012
US$m
892
987
(267)
(25)
(11)
(16)
248
–
916
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure
DATA PER AMERICAN DEPOSITARY SHARE (ADS)
Earnings per ADS based on 52.9% interest in Reed Elsevier combined businesses:
Adjusted
Basic
Net dividend per ADS paid in the year
Net dividend per ADS paid and proposed in relation to the financial year
2013
US$
$3.37
$3.05
$1.48
$1.54
Restated
2012
US$m
855
943
(283)
(13)
(8)
88
70
81
878
Restated
2012
US$
$3.14
$2.85
$1.39
$1.46
Consolidated statement of financial position
AS AT 31 DECEMBER
Shareholders’ equity
2013
US$m
2,098
2012
US$m
1,954
Adjusted earnings per American Depositary Share is based on Reed Elsevier PLC shareholders’ 52.9% share of the adjusted profit
attributable of the Reed Elsevier combined businesses, which excludes amortisation of acquired intangible assets, acquisition related
costs, disposal related and other non operating items, the net financing charge or credit on defined benefit pension schemes, exceptional
prior year tax credits (in 2012 only) and movements in deferred tax assets and liabilities that are not expected to crystallise in the near term
and include the benefit of tax amortisation where available on acquired goodwill and intangible assets. Adjusted figures are additional
performance measures used by management and are described in note 9 to the Reed Elsevier PLC consolidated financial statements.
Reed Elsevier PLC shares are quoted on the New York Stock Exchange and trading is in the form of American Depositary Shares (ADSs),
evidenced by American Depositary Receipts (ADRs), representing four Reed Elsevier PLC ordinary shares. (CUSIP No. 758205207;
trading symbol, RUK; Bank of New York is the ADR Depositary.)
29275_SAS_p200-205 OTHER INFO.indd 204
07/03/2014 12:10
Reed Elsevier Annual Reports and Financial Statements 2013
205
Reed Elsevier NV
Summary financial information in US dollars
Basis of preparation
The summary financial information is a simple translation of the Reed Elsevier NV consolidated financial statements into US dollars at
the stated rates of exchange. The financial information provided below is prepared under IFRS as used in the preparation of the Reed
Elsevier NV consolidated financial statements. It does not represent a restatement under US GAAP which would be different in some
significant respects.
EXCHANGE RATES FOR TRANSLATION OF EURO ($:€1)
Income statement
Statement of financial position
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER
Adjusted profit attributable to shareholders
Share of joint ventures’:
Amortisation of acquired intangible assets
Acquisition related costs
Net financing charge on defined benefit pension schemes
Disposals and other non operating items
Other deferred tax credits from intangible assets*
Exceptional prior year tax credit
Profit attributable to shareholders
2013
US$:€
1.32
1.38
2012
US$:€
1.29
1.32
2013
US$m
933
(253)
(24)
(10)
(15)
234
–
865
Restated
2012
US$m
889
(267)
(13)
(7)
83
67
76
828
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
* movements on deferred tax liabilities arising on acquired intangible assets that do not qualify for tax amortisation and in 2013
non-recurring deferred tax credits arising on the alignment of certain business assets with their global management structure.
DATA PER AMERICAN DEPOSITARY SHARE (ADS)
Earnings per ADS based on 50% interest in Reed Elsevier combined businesses:
Adjusted
Basic
Net dividend per ADS paid in the year
Net dividend per ADS paid and proposed in relation to the financial year
2013
US$
$2.61
$2.40
$1.24
$1.34
Restated
2012
US$
$2.43
$2.24
$1.18
$1.20
G
o
v
e
r
n
a
n
c
e
Consolidated statement of financial position
AS AT 31 DECEMBER
Shareholders’ equity
2013
US$m
1,979
2012
US$m
1,851
Adjusted earnings per American Depositary Share is based on Reed Elsevier NV shareholders’ 50% share of the adjusted profit
attributable of the Reed Elsevier combined businesses, which excludes amortisation of acquired intangible assets, acquisition related
costs, disposal related and other non operating items, the net financing charge or credit on defined benefit pension schemes, exceptional
prior year tax credits (in 2012 only) and movements in deferred tax assets and liabilities that are not expected to crystallise in the near term
and include the benefit of tax amortisation where available on acquired goodwill and intangible assets. Adjusted figures are additional
performance measures used by management and are described in note 9 to the Reed Elsevier NV consolidated financial statements.
Reed Elsevier NV shares are quoted on the New York Stock Exchange and trading is in the form of American Depositary Shares (ADSs),
evidenced by American Depositary Receipts (ADRs), representing two Reed Elsevier NV ordinary shares. (CUSIP No. 758204200;
trading symbol, ENL; Bank of New York is the ADR Depositary.)
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p200-205 OTHER INFO.indd 205
07/03/2014 12:10
206 FINANCIAL STATEMENTS AND OTHER INFORMATION
SHAREHOLDER INFORMATION
Shareholder information
Annual Reports and Financial Statements 2013
The Annual Reports and Financial Statements for the Reed
Elsevier combined businesses, Reed Elsevier PLC and Reed
Elsevier NV for the year ended 31 December 2013, and the
Corporate Governance Statement of Reed Elsevier NV are
available on the Reed Elsevier website, and from the registered
offices of the respective parent companies shown on page 209.
Additional financial information, including the interim and
full-year results announcements, Interim Management
Statements and presentations is also available on the Reed
Elsevier website, www.reedelsevier.com.
The Reed Elsevier combined financial statements set out in the
Annual Reports and Financial Statements are expressed in
sterling, with summary combined financial information expressed
in euros. The financial statements of Reed Elsevier PLC and Reed
Elsevier NV are expressed in sterling and euros respectively.
Interim results
Reed Elsevier PLC and Reed Elsevier NV no longer publish interim
results in hard copy. The interim results are available on the Reed
Elsevier website, www.reedelsevier.com.
Share price information
Reed Elsevier PLC’s ordinary shares are quoted on the London
Stock Exchange.
Reed Elsevier NV’s ordinary shares are quoted on the NYSE
Euronext Amsterdam Stock Exchange.
The Reed Elsevier PLC and Reed Elsevier NV ordinary shares are
quoted on the New York Stock Exchange in the form of American
Depositary Shares (ADSs), evidenced by American Depositary
Receipts (ADRs). Each Reed Elsevier PLC ADR represents four
Reed Elsevier PLC ordinary shares. Each Reed Elsevier NV ADR
represents two Reed Elsevier NV ordinary shares.
The Reed Elsevier PLC and Reed Elsevier NV ordinary share
prices and the ADR prices may be obtained from the Reed Elsevier
website, other online sources and the financial pages of some
newspapers.
FOR FURTHER INFORMATION VISIT WWW.REEDELSEVIER.COM
Information for Reed Elsevier PLC
ordinary shareholders
Shareholder services
The Reed Elsevier PLC ordinary share register is administered
by Equiniti Limited. Equiniti provides a free online portal for
shareholders at www.shareview.co.uk. Shareview allows
shareholders to monitor the value of their shareholdings, view their
dividend payments and submit dividend mandate instructions.
Shareholders can also submit their proxy voting instructions
ahead of company meetings, as well as update their personal
contact details. Shareview Dealing provides a share purchase
and sale facility. Equiniti’s contact details appear on page 209.
Electronic communications
While hard copy shareholder communications continue to be
available to those shareholders requesting them, in accordance
with the Companies Act 2006 and the company's articles of
association, Reed Elsevier PLC uses the Reed Elsevier website
as the main method of communicating with shareholders.
By registering their details online at Shareview, shareholders
can be notified by email when shareholder communications
are published on the website. Shareholders can also use the
Shareview website to appoint a proxy to vote on their behalf at
shareholder meetings.
Shareholders who hold their Reed Elsevier PLC shares through
CREST may appoint proxies for shareholder meetings through the
CREST electronic proxy appointment service by using the
procedures described in the CREST manual.
Dividend mandates
Shareholders are encouraged to have their dividends paid directly
into a UK bank or building society account. This method of payment
reduces the risk of delay or loss of dividend cheques in the post
and ensures the account is credited on the dividend payment
date. A dividend mandate form can be obtained online at
www.shareview.co.uk, or by contacting Equiniti at the address
shown on page 209.
Equiniti has established a service for overseas shareholders in
over 90 countries, which enables shareholders to have their
dividends automatically converted from sterling and paid directly
into their nominated bank account. Further details of this service,
and the fees applicable, are available at www.shareview.co.uk or
by contacting Equiniti at the address shown on page 209.
Dividend Reinvestment Plan
Shareholders can choose to reinvest their Reed Elsevier PLC
dividends by purchasing further shares through the Dividend
Reinvestment Plan (DRIP) provided by Equiniti. Further
information concerning the DRIP facility, together with the terms
and conditions and an application form can be obtained online at
www.shareview.co.uk/dividends or by contacting Equiniti at the
address shown on page 209.
29275_SAS_p206-211.indd 206
07/03/2014 12:11
Reed Elsevier Annual Reports and Financial Statements 2013
207
How to avoid share fraud and boiler room scans
The Financial Conduct Authority (FCA) has issued some guidance
on how to recognise and avoid investment fraud:
Legitimate firms authorised by the FCA are unlikely to contact
you unexpectedly with an offer to buy or sell shares.
If you receive an unsolicited phone call, do not get into a
conversation, note the name of the person and firm contacting
you and then end the call.
Check the Financial Services Register available at
www.fca.org.uk to see if the person and firm contacting you
is authorised by the FCA. If you wish to call the person or
firm back, only use the contact details listed on the Register.
Call the FCA on 0800 111 6768 if the firm does not have any
contact details on the Register, or if you are told that they are
out of date.
Search the list of unauthorised firms to avoid at
www.fca.org.uk/scams.
If you do buy or sell shares through an unauthorised firm, you
will not have access to the Financial Ombudsman Service or the
Financial Services Compensation Scheme.
Consider obtaining independent financial and professional
advice before you hand over any money. If it sounds too good to
be true it probably is.
How to report a scam
If you are approached by fraudsters, please tell the FCA using the
share fraud reporting form at www.fca.org.uk/scams, where you
can find out more about investment scams. You can also call the
FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters, you should
contact Action Fraud on 0300 123 2040.
Share dealing service
A telephone and internet dealing service is available through Reed
Elsevier PLC’s Registrar, Equiniti, which provides a simple way for
UK-resident shareholders to buy or sell Reed Elsevier PLC
shares. For telephone dealing call 08456 037 037 between 8.00am
and 4.30pm, Monday to Friday, and for internet dealing log on to
www.shareview.co.uk/dealing. You will need your shareholder
account number shown on your dividend tax voucher.
Individual savings account (ISA)
A single company ISA for Reed Elsevier PLC shares is available
through Equiniti. Details may be obtained from
www.shareview.co.uk/ISA, by writing to Equiniti at the address
shown on page 209,or by calling their ISA helpline on 0871 384 2244.
ShareGift
The Orr Mackintosh Foundation operates a charity share donation
scheme for shareholders with small parcels of shares whose value
makes it uneconomic to sell them. Details of the scheme can be
obtained from the ShareGift website at www.sharegift.org, or by
telephoning ShareGift on 020 7930 3737.
Sub-division of ordinary shares and share consolidation
On 28 July 1986, each Reed Elsevier PLC ordinary share of £1
nominal value was sub-divided into four ordinary shares of 25p
each. On 2 May 1997, each 25p ordinary share was sub-divided into
two ordinary shares of 12.5p each. On 7 January 2008, the ordinary
shares of 12.5p each were consolidated on the basis of 58 new
ordinary shares of 1451⁄116p nominal value for every 67 ordinary
shares of 12.5p each held.
Capital gains tax
The mid-market price of Reed Elsevier PLC’s £1 ordinary shares
on 31 March 1982 was 282p. Adjusting for the sub-divisions and
share consolidation referred to above results in an equivalent
mid-market price of 40.72p for each existing ordinary share of
1451⁄116p nominal value.
Warning to shareholders – unsolicited
investment advice
From time to time shareholders may receive unsolicited calls
from fraudsters.
Fraudsters use persuasive and high-pressure tactics to lure
investors into scams, sometimes known as boiler room scams.
They may offer to sell shares that turn out to be worthless or
non-existent, or to buy shares at an inflated price in return for
an upfront payment.
While high profits are promised, if you buy or sell shares in this
way you will probably lose your money.
5,000 people contact the Financial Conduct Authority about
share fraud each year, with victims losing an average of
£20,000.
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p206-211.indd 207
07/03/2014 12:11
208 FINANCIAL STATEMENTS AND OTHER INFORMATION
SHAREHOLDER INFORMATION
Information for Reed Elsevier NV
ordinary shareholders
Shareholder enquiries
Enquiries from holders of Reed Elsevier NV registered ordinary
shares in relation to share transfers, dividends, change of address
and bank accounts should be directed to the Company Secretary
of Reed Elsevier NV, at the registered office address shown on
page 209.
Dividends
Dividends on Reed Elsevier NV ordinary shares are declared and
paid in euros. Registered shareholders in Reed Elsevier NV will
receive dividends from the company by transmission to the bank
account which they have notified to the company. Dividends on
shares in bearer form are paid through the intermediary of a bank
or broker.
Dividend Reinvestment Plan
By instructing their bank or intermediary, shareholders can
choose to reinvest their Reed Elsevier NV dividends by purchasing
further shares through the Dividend Reinvestment Plan (DRIP)
provided by ABN AMRO Bank NV. Further information concerning
the DRIP facility can be obtained online at www.securitiesinfo.nl.
Consolidation of ordinary shares
On 7 January 2008, the Reed Elsevier NV ordinary share of €0.06
each were consolidated on the basis of 58 new ordinary shares of
€0.07 each for every 67 ordinary shares of €0.06 each held.
Information for Reed Elsevier PLC and
Reed Elsevier NV ADR holders
The Reed Elsevier PLC and Reed Elsevier NV ADR Depositary is
BNY Mellon.
Reed Elsevier PLC’s CUSIP number is 758205207 and its trading
symbol is RUK. Each Reed Elsevier PLC ADR represents four
Reed Elsevier PLC ordinary shares.
Reed Elsevier NV’s CUSIP number is 758204200 and its trading
symbol is ENL. Each Reed Elsevier NV ADR represents two
Reed Elsevier NV ordinary shares.
ADR shareholder services
Enquiries concerning Reed Elsevier PLC or Reed Elsevier NV
ADRs should be addressed to the ADR Depositary at the address
shown on page 209.
Dividends
Dividend payments on Reed Elsevier PLC and Reed Elsevier NV
ADRs are converted into US dollars by the ADR Depositary.
Annual Report on Form 20-F
The Annual Report on Form 20-F for the Reed Elsevier combined
businesses, Reed Elsevier PLC and Reed Elsevier NV is filed
electronically with the United States Securities and Exchange
Commission. A copy of the Form 20-F is available on the Reed
Elsevier website, or from the ADR Depositary at the address
shown on page 209.
29275_SAS_p206-211.indd 208
07/03/2014 12:11
Reed Elsevier Annual Reports and Financial Statements 2013
209
Reed Elsevier NV
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 485 2222
Fax: +31 (0)20 485 2032
Deloitte Accountants BV
Orlyplein 10
1043 DP Amsterdam
The Netherlands
Listing/paying agent
ABN AMRO Bank NV
Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
WWW.SECURITIESINFO.NL
Contacts
Reed Elsevier PLC
1-3 Strand
London WC2N 5JR
United Kingdom
Tel: +44 (0)20 7166 5500
Fax: +44 (0)20 7166 5799
Auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ
United Kingdom
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
WWW.SHAREVIEW.CO.UK
Tel: 0871 384 2960
(calls cost 8p per minute plus additional network charges
where applicable)
Tel: +44 121 415 7047 (callers outside the UK)
Reed Elsevier PLC and Reed Elsevier NV ADR Depositary
BNY Mellon Depositary Receipts
PO Box 43006
Providence, RI 02940-3006
USA
WWW.ADRBNY.COM
Email: shrrelations@bnymellon.com
Tel: +1 888 269 2377
+1 201 680 6825 (callers outside the US)
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p206-211.indd 209
07/03/2014 12:11
210 FINANCIAL STATEMENTS AND OTHER INFORMATION
2014 FINANCIAL CALENDAR
2014 financial calendar
27 February
23 April
23 April
24 April
30 April
1 May
2 May
5 May
23 May
30 May
24 July
6 August
8 August
28 August
4 September
PLC/NV
PLC/NV
NV
PLC
PLC/NV
NV
PLC
NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
PLC/NV
Results announcement for the year ended 31 December 2013
Interim management statement issued in relation to the 2014 financial year
Annual General Meeting – Reed Elsevier NV, Hotel Okura, Ferdinand Bolstraat 33, 1072 LH Amsterdam
Annual General Meeting – Reed Elsevier PLC, Millennium Hotel, Grosvenor Square, London W1K 2HP
Ex-dividend date – 2013 final dividend, Reed Elsevier PLC ordinary shares and ADRs, and Reed Elsevier
NV ordinary shares
Ex-dividend date – 2013 final dividend, Reed Elsevier NV ADRs
Record date – 2013 final dividend, Reed Elsevier PLC ordinary shares and ADRs
Record date – 2013 final dividend, Reed Elsevier NV ordinary shares and ADRs
Payment date – 2013 final dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
Payment date – 2013 final dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
Interim results announcement for the six months to 30 June 2014
Ex-dividend date – 2014 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares and ADRs
Record date – 2014 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares and ADRs
Payment date – 2014 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ordinary shares
Payment date – 2014 interim dividend, Reed Elsevier PLC and Reed Elsevier NV ADRs
The following tables set out dividends paid (or proposed) in relation to the three financial years 2011–2013.
Final dividend for 2013*
Interim dividend for 2013
Final dividend for 2012
Interim dividend for 2012
Final dividend for 2011
Interim dividend for 2011
per PLC ordinary share
per NV ordinary share
Payment date
17.95p
6.65p
17.00p
6.00p
15.90p
5.65p
€0.374
€0.132
€0.337
€0.130
€0.326
€0.110
23 May 2014
29 August 2013
23 May 2013
31 August 2012
21 May 2012
26 August 2011
*Proposed dividend, to be submitted for approval at the respective Annual General Meetings of Reed Elsevier PLC and Reed Elsevier NV in April 2014.
Final dividend for 2013
Interim dividend for 2013
Final dividend for 2012
Interim dividend for 2012
Final dividend for 2011
Interim dividend for 2011
per PLC ADR
**
$0.412
$1.02578
$0.37898
$1.00379
$0.36860
per NV ADR
**
$0.34948
$0.86555
$0.32515
$0.82940
$0.31618
Payment date
30 May 2014
5 September 2013
30 May 2013
7 September 2012
29 May 2012
2 September 2011
**Payment will be determined using the appropriate £/US$ and €/US$ exchange rate on 23 May 2014.
Note: The dividend rates shown for Reed Elsevier NV ordinary shares and ADRs are gross dividend rates before the deduction of Dutch
withholding tax.
29275_SAS_p206-211.indd 210
07/03/2014 12:11
Reed Elsevier Annual Reports and Financial Statements 2013
211
Principal operating locations
Reed Elsevier
1-3 Strand
London WC2N 5JR, UK
Tel: +44 (0)20 7166 5500
Fax: +44 (0)20 7166 5799
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 485 2222
Fax: +31 (0)20 485 2032
125 Park Avenue, 23rd Floor
New York, NY 10017, USA
Tel: +1 212 309 8100
Fax: +1 212 309 8187
FOR FURTHER INFORMATION OR CONTACT DETAILS,
PLEASE CONSULT OUR WEBSITE: WWW.REEDELSEVIER.COM
Elsevier
Radarweg 29
1043 NX Amsterdam
The Netherlands
WWW.ELSEVIER.COM
The Boulevard, Langford Lane
Kidlington, Oxford OX5 1GB, UK
1600 John F. Kennedy Blvd
Suite 1800, Philadelphia
PA 19103, USA
3251 Riverport Lane
Maryland Heights, MO 63043, USA
LexisNexis Risk Solutions
1000 Alderman Drive
Alpharetta, GA 30005, USA
WWW.LEXISNEXIS.COM/RISK
Reed Business Information
Quadrant House, The Quadrant
Sutton, Surrey SM2 5AS, UK
WWW.REEDBUSINESS.CO.UK
LexisNexis Legal & Professional
125 Park Avenue, 23rd Floor
New York, NY 10017, USA
WWW.LEXISNEXIS.COM
9443 Springboro Pike
Miamisburg, OH 45342, USA
Lexis House, 30 Farringdon Street
London EC4A 4HH, UK
WWW.LEXISNEXIS.CO.UK
Reed Exhibitions
Gateway House, 28 The Quadrant
Richmond, Surrey TW9 1DN, UK
WWW.REEDEXPO.COM
Elsevier Reed Finance BV
Radarweg 29
1043 NX Amsterdam
The Netherlands
Tel: +31 (0)20 485 2222
Fax: +31 (0)20 485 2032
O
v
e
r
v
i
e
w
B
u
s
i
n
e
s
s
r
e
v
i
e
w
i
F
n
a
n
c
i
a
l
r
e
v
i
e
w
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
29275_SAS_p206-211.indd 211
07/03/2014 12:11
FOLD
FOLD
Reed Elsevier is a world leading provider of
information solutions for professional customers
across industries. We help scientists make new
discoveries, lawyers win cases, doctors save lives,
corporations build commercial relationships,
insurance companies assess risk, and government
and financial institutions detect fraud.
Credits
Designed and produced by
saslondon.com
Board photography by
Iain Crockart
Printed by
Pureprint Group, ISO14001, FSC® certified and CarbonNeutral®
The 2013 Annual Reports and Financial Statements is printed
using paper containing a minimum of 75% recycled content,
of which 100% is de-inked post-consumer waste. All of the pulp
is bleached using an elemental chlorine free process (ECF).
Printed in the UK by Pureprint using their
environmental printing technology; vegetable inks were used
throughout. Pureprint is a CarbonNeutral® company. Both
manufacturing mill and printer are ISO14001 registered and are
Forest Stewardship Council® (FSC) chain-of-custody certified.
and
Get more information online
A full pdf of the Annual Report and further
information about Reed Elsevier and our
businesses can be found online at our
corporate website: www.reedelsevier.com
Forward-looking statements
The Reed Elsevier Annual Reports and Financial Statements 2013 contain forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as
amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. These statements are subject to a number of risks and uncertainties that could cause actual
results or outcomes to differ materially from those currently being anticipated. The terms “estimate”, “project”, “plan”, “intend”, “expect”, “should be”, “will be”, “believe” and
similar expressions identify forward-looking statements. Factors which may cause future outcomes to differ from those foreseen in forward-looking statements include, but
are not limited to competitive factors in the industries in which Reed Elsevier operates; demand for Reed Elsevier’s products and services; exchange rate fluctuations; general
economic and business conditions; legislative, fiscal, tax and regulatory developments and political risks; the availability of third-party content and data; breaches of our data
security systems and interruptions in our information technology systems; changes in law and legal interpretations affecting Reed Elsevier’s intellectual property rights and
other risks referenced from time to time in the filings of Reed Elsevier with the US Securities and Exchange Commission.
81018_SAS_Cover.indd 19
FOLD
FOLD
07/03/2014 18:59
FOLDFOLDFOLDFOLDAnnual Reports andFinancial Statements 2013Annual Reports and Financial Statements 2013www.reedelsevier.com81018_SAS_Cover.indd 1807/03/2014 18:59