The market has welcomed Reed Elsevier's 2012 final results, which showed a 6% rise in underlying adjusted operating profit to 1.71 billion pounds, and 4% underlying revenue growth to 6.11 billion pounds. At the time of writing, Reed's share price was up 1.6% on the news, and why not? But is this the right time to buy?
The professional publishing and events company had some nice figures to print, including a 7% rise in adjusted earnings per share and a 42% rise in reported EPS. Net debt fell from 3.4 billion pounds last year, to 3.1 billion pounds. Investors will enjoy the 7% increase in its full-year dividend to 23 pence, and the news that after completing 100 million pounds of share buybacks this year (on top of 250 million pounds last year), a further 300 million pounds in buybacks are in train for the rest of this year. Much of this money comes from 242 million pounds worth of disposals Reed made in 2012.
Management also reported "good progress" on its strategy to boost its professional customer services by combining content and data with analytics and technology in global platforms, and its focus on organic growth, rather than taking the slightly riskier acquisition trail. It is also making good progress in expanding into new markets. Overall, it's a bright and bushy report, and although management is clearly concerned about the wider economic outlook (who isn't?), it claims the company's "positive momentum" should deliver another year of underlying revenue, profit and earnings growth.
Publish and be praised
The results leave Reed on a solid yield of 3.6%, covered 2.2 times, just above the FTSE 100 average of 3.3%. Investors will be looking to see further progress in cutting its net debt, which has been a drag on dividends, to see if that can punch higher. The latest 7% hike is a good sign of management intentions. Trading at 12.8 times earnings, compared to the FTSE 100 average of 13.8, you aren't overpaying for that income. These results continue a strong run for Reed since the dips of last June, when the share price fell below 5 pounds. It now trades at over 7 pounds, a rise of 28%. Publishing is a risky area these days, as the Internet grinds away at old business models, but Reed's focus on trade publications and digital services has helped it survive the digital revolution in good shape. The market likes this stock, and so do I.
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