Earnings: Reed Elsevier Eases Debt Pressure With £800 Million Rights Issue

Reed Elsevier (NYSE: RUK) will raise up to £800 million in a placement of 170 million new shares, in a move designed to ease mounting debt pressure in these credit-shy times. To compound its worries the company’s Reed Business Information B2B pubslisher saw its H1 profits drop by 47 percent at constant currency rates to £39 million; its revenues were 17 percent lower at £463 million — including a 30 percent drop in ad revenue and even 17 percent lower online revenue.

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Rights issue: New chairman Anthony Habgood says the company doesn’t have a liquidity problem, but does need the money: “Last year’s acquisition of ChoicePoint and the terminated sale of RBI have given us more debt than is prudent in current economic conditions.” The company has paid off $3.8 billion (£2.3 billion) of its debt from the Choicepoint buy, but has another $1 billion (£611 million) to pay by 2011.

H109 earnings: The company’s H109 revenue rose 26 percent in sterling terms to £3.06 billion — just a three percent rise at constant currency rates — while profits after exceptionals and restructuring charges dropped by 29 percent to £316 million, a 36 percent profit fall at constant currencies.

RBI losses: Reed has reportedly hinted it might reverse long-term plans and keep some or all of the company and these figures would surely dampen any M&A interest in it. Still, Reed points out that subscriptions and online data sales — which account for half its revenue — have “held up well” and that revenue was down just two percent.

One-off charges: If you follow the little asterix on the profit figure in Reed’s release, you find the company lost: £195 million from its acquisitions’ “intangible assets”; £140 million in a goodwill impairment charge, mainly due to losses at RBI in the US; £125 million in restructuring and acquisition costs and £6 million due to tax reclassification of joint ventures. The total comes to £466 million.

Advertising bad; subscriptions good: It’s a trend we’ve seen across the professional information sector with companies like Informa: subscription-based businesses do far better in the recession. So scientific and educational publisher Elsevier and LexisNexis accounted for 81 percent of Reed’s H1 profits, while RBI and Reed Exhibitions contributed a combined 33 percent drop in profitability. Online subs now account for 80 percent of Elsevier’s main science and technology division. This month Elsevier rolled out a new online format for its scientific articles.

Cost-savings: Reed says its $510 million (£342.3 million) restructuring plan, designed to save $160 million (£97.8 million) in savings this year, is “on track” and that $250 million (£152.8 million) should be lopped off the company’s cost ledger by 2011.