Reed Elsevier will release its FY12 results on 28 February before market and host an analyst meeting at 9am GMT.
Organic growth is expected to remain unchanged s. 9M12 at 3%. This leads to sales of L 6,198m. The REBITA margin is expected to improve by 60bps y/y to 27.7% with an improvement of 110bps in 1H12 and an expected 20bps in 2H12. REBITA arrives at L 1,718m. Bottom-line, we are looking for L 1,125m adjusted net profits or 50.1p per share.
All divisions show positive organic growth and higher profitability in FY12. For Elsevier, we pencilled in 2% organic growth and a REBITA margin improvement of 10bps y/y to 37.4%. For Risk, we are looking for 6% organic sales growth and a 150bps REBITA margin increase to 41.4%. For Legal, we count on 1% organic growth for FY12 and a slight 50bps rise in REBITA margin y/y to 14.5%. Excluding biennial events, we count on underlying revenue growth of 7% in the Exhibitions business and a margin of 24.1%, up 50bps y/y. In RBI, we count on 1% organic growth and a strong 250bps improvement in the REBITA margin to 18.3%.
Business portfolio continues to improve. In FY12, Reed Elsevier bought out its Brazilian exhibition joint venture and acquired some small high-growth exhibitions and paid content and data businesses. In addition, they sold the magazine Variety, the labour site TotalJobs, MarketCast and other small publishing and services assets. Today the company’s exposure to print should be in our view at 18% and the exposure to emerging markets is expected to have increased to 19%.
Buying back shares. The company will have spent L 250m on share buy backs in FY12. In FY13, they will continue to transform the business portfolio through organic development and by selling businesses that no longer fit the strategy. Like last year, we expect gross divestment proceeds to be used to buy back shares because disposals are mildly EPS-dilutive. Net debt is expected to fall to € 3.7bn by the end of the year.
We reiterate our Accumulate rating and our DCF-based target price of € 13. We like Reed Elsevier for i) its strong organic growth track record and profitability, which continues to increase, ii) its business mix, which is being optimized further and iii) good FCF and dividend yield.