Reed Elsevier Debt surged on 21.2% and Net Debt / EBITDA jumped on 0.4x from 2.0x to 2.4x
21 Feb 2019 • About Reed Elsevier (
$REL) • By InTwits
Reed Elsevier reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 34.5% in 2018 vs. 34.4% in 2017 vs. 32.7% in 2014
- Reed Elsevier has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- The company has highly profitable business model: ROIC is 21.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.4x while industry average is -1.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Reed Elsevier's Revenue increased on 2.1%. During 2014-2018 Revenue growth topped in 2016 at 15.4% and was decelerating since that time. EBITDA Margin showed almost no change in 2018. EBITDA Margin stuck to a growing trend at 0.53 pp per annum in the last 5 years.
Gross Margin increased slightly on 0.51 pp from 64.2% to 64.7% in 2018. During 2014-2018 Gross Margin bottomed in 2016 at 63.9% and was growing since that time. SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue declined at -0.69 pp per annum in 2014-2018.
Net Income margin decreased on 3.5 pp from 22.4% to 19.0% in 2018.
Investments (CAPEX, working capital and M&A)
Reed Elsevier's CAPEX/Revenue was 0.75% in 2018. CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 0.73%. CAPEX as a % of Revenue declined at -0.12 pp per annum in the last 5 years.
Return on investment
The company operates at high and attractive ROIC (21.0%) and ROE (61.5%). ROIC showed almost no change in 2018. ROE dropped on 10.7 pp from 72.2% to 61.5% in 2018. During 2014-2018 ROIC topped in 2015 at 21.4% and was declining since that time. ROE followed a growing trend at 12.7 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 2.4x Net Debt / EBITDA and 2.5x Debt / EBITDA. Net Debt / EBITDA jumped on 0.4x from 2.0x to 2.4x in 2018. Debt surged on 21.2% while cash increased on 2.7%.
Reed Elsevier has short term refinancing risk: cash is only 8.2% of short term debt.
Valuation and dividends
Reed Elsevier's trades at EV/EBITDA 15.6x and P/E 23.9x.
Management team
The company's CEO is Erik Nils Engstrom. Erik Nils Engstrom is a founder and has 4 years tenure with the company. Reed Elsevier's CFO is Nicholas Luff "Nick". Nicholas Luff "Nick" has 4 years tenure at the company.
Financial and operational results
FY ended 31 Dec 2018
Reed Elsevier ($REL) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 5,773 | 5,971 | 6,889 | 7,341 | 7,492 | 2.1% |
| Gross Profit | 3,767 | 3,842 | 4,401 | 4,713 | 4,848 | 2.9% |
| SG&A | 2,401 | 2,409 | 2,730 | 2,845 | 2,916 | 2.5% |
| EBITDA | 1,885 | 1,953 | 2,338 | 2,524 | 2,583 | 2.3% |
| Net Income | 955 | 1,008 | 1,150 | 1,648 | 1,422 | -13.7% |
Balance Sheet
|
|---|
| Cash | 276 | 122 | 162 | 111 | 114 | 2.7% |
| Short Term Debt | 676 | 624 | 1,169 | 762 | 1,392 | 82.7% |
| Long Term Debt | 3,149 | 3,278 | 4,087 | 4,491 | 4,973 | 10.7% |
Cash flow
|
|---|
| Capex | 67 | 65 | 51 | 51 | 56 | 9.8% |
Ratios
|
|---|
| Revenue growth | -4.3% | 3.4% | 15.4% | 6.6% | 2.1% | |
| EBITDA growth | -1.5% | 3.6% | 19.7% | 8.0% | 2.3% | |
|
|---|
| Gross Margin | 65.3% | 64.3% | 63.9% | 64.2% | 64.7% | 0.5% |
| EBITDA Margin | 32.7% | 32.7% | 33.9% | 34.4% | 34.5% | 0.1% |
| SG&A, % of revenue | 41.6% | 40.3% | 39.6% | 38.8% | 38.9% | 0.2% |
| Net Income Margin | 16.5% | 16.9% | 16.7% | 22.4% | 19.0% | -3.5% |
| CAPEX, % of revenue | 1.2% | 1.1% | 0.7% | 0.7% | 0.7% | 0.1% |
|
|---|
| ROIC | 21.0% | 21.4% | 21.4% | 21.4% | 21.0% | -0.4% |
| ROE | 21.8% | 24.4% | 52.1% | 72.2% | 61.5% | -10.7% |
| Net Debt/EBITDA | 1.9x | 1.9x | 2.2x | 2.0x | 2.4x | 0.4x |
Peers in Media
Below you can find Reed Elsevier benchmarking vs. other companies in Media industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Marimedia Ltd ($MARI) | 45.7% | 20.1% | 66.0% | 67.6% | |
| Future ($FUTR) | | -9.4% | -1.3% | 43.1% | 47.6% |
| Grupo Clarin Sa ($GCLA) | 39.8% | -57.9% | 37.2% | 24.4% | |
| Jaywing ($JWNG) | | 26.6% | 6.5% | 23.8% | 6.7% |
| Tla Worldwide ($TLA) | 6.3% | 130.0% | 10.6% | 23.4% | |
| |
|---|
| Median (24 companies) | 1.9% | 0.8% | 3.4% | 2.7% | 9.5% |
|---|
| Reed Elsevier ($REL) | | 3.4% | 15.4% | 6.6% | 2.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Porta Communications ($PTCM) | 83.4% | 79.0% | 80.1% | 84.9% | |
| Jaywing ($JWNG) | 81.0% | 89.0% | 88.4% | 80.8% | 77.2% |
| Tla Worldwide ($TLA) | 99.9% | 78.8% | 75.5% | 68.1% | |
| Spaceandpeople ($SAL) | 62.2% | 58.8% | 57.2% | 66.1% | |
| Haynes Publishing Group ($HYNS) | 52.9% | 60.2% | 53.6% | 56.4% | 59.6% |
| |
|---|
| Median (22 companies) | 43.7% | 41.2% | 38.5% | 39.5% | 40.7% |
|---|
| Reed Elsevier ($REL) | 65.3% | 64.3% | 63.9% | 64.2% | 64.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Haynes Publishing Group ($HYNS) | 38.8% | 33.5% | 15.4% | 35.0% | 36.8% |
| Nahl Group ($NAH) | 28.8% | 29.5% | 34.9% | 27.4% | |
| Uls Technology ($ULS) | 16.7% | 21.1% | 19.8% | 21.2% | 13.8% |
| Spaceandpeople ($SAL) | 10.5% | 11.2% | 1.6% | 17.2% | |
| Dods(Group ($DODS) | 10.7% | 0.6% | 12.3% | 15.9% | 12.3% |
| |
|---|
| Median (24 companies) | 12.9% | 11.2% | 7.0% | 6.0% | 8.2% |
|---|
| Reed Elsevier ($REL) | 32.7% | 32.7% | 33.9% | 34.4% | 34.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Trader Media East ($TME) | 3.8% | 2.3% | | 47.5% | |
| Dods(Group ($DODS) | 0.6% | 0.4% | 0.6% | 12.7% | 1.3% |
| Grupo Clarin Sa ($GCLA) | 12.8% | 1.6% | 2.7% | 2.7% | |
| Naspers ($NPSN) | | 4.0% | 3.1% | 2.5% | 2.0% |
| Ite Group ($ITE) | 1.7% | 1.3% | 1.8% | 2.1% | 2.4% |
| |
|---|
| Median (24 companies) | 1.6% | 1.1% | 0.7% | 0.9% | 1.3% |
|---|
| Reed Elsevier ($REL) | 1.2% | 1.1% | 0.7% | 0.7% | 0.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Uls Technology ($ULS) | 44.1% | 39.6% | 39.3% | 31.3% | 19.1% |
| Independent News & Media ($INM) | 29.6% | 65.1% | 118.5% | 24.4% | |
| Marimedia Ltd ($MARI) | 39.0% | 6.4% | 39.6% | 23.9% | |
| Nahl Group ($NAH) | 31.5% | 26.0% | 23.0% | 17.3% | |
| Dcd Media ($DCD) | -8.8% | -10.5% | -3.6% | 17.0% | |
| |
|---|
| Median (26 companies) | 7.8% | 6.7% | 1.4% | -0.2% | 1.3% |
|---|
| Reed Elsevier ($REL) | 21.0% | 21.4% | 21.4% | 21.4% | 21.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ite Group ($ITE) | 0.3x | 1.4x | 6.3x | 7.3x | 12.7x |
| Porta Communications ($PTCM) | 3.4x | 2.7x | | 5.0x | |
| Quarto Group Inc ($QRT) | 1.4x | 1.1x | 1.8x | 3.9x | |
| Future ($FUTR) | | 1.6x | | 1.9x | 1.3x |
| Jaywing ($JWNG) | 3.3x | 1.9x | 1.6x | 1.6x | 3.8x |
| |
|---|
| Median (17 companies) | 0.8x | 1.1x | -0.1x | 0.5x | 0.0x |
|---|
| Reed Elsevier ($REL) | 1.9x | 1.9x | 2.2x | 2.0x | 2.4x |
