Home » Stocks & Shares » Reed Elsevier share price slides on underwhelming full-year results

Reed Elsevier share price slides on underwhelming full-year results

Xavier Basil
  • February 26th 2015, 14:33
  • Last Updated: October 21st 2019, 14:26

Reed Elsevier Plc (LON:REL) today reported full-year results that were broadly in line with forecasts and announced plans to rename itself RELX and simplify its structure in order to “increase share price transparency”. The company also pledged to repurchase £500 million worth of shares in 2015.

Reed Elsevier’s revenue in 2015 came in at £5.77 billion, up three percent from 2013 on an underlying basis. Full-year underlying adjusted operating profit rose five percent to £1.74 billion. The company forecast further growth this year.
Reed Elsevier’s chief executive officer Erik Engstrom commented:”In 2014 we maintained good momentum across our key financial metrics of underlying revenue growth, underlying operating profit growth, adjusted earnings per share growth, and return on invested capital. We made further strategic and operational progress as we continued to transform our business, primarily through organic development.”

However, analysts questioned whether the solid results were enough to support the strong share price momentum, while some of them pointed out that the share buyback planned for this year was down compared to last year’s £600 million. Jefferies analyst David Reynolds said the group had a “somewhat lukewarm finish to the year”.
In today’s trading, Reed Elsevier shares tumbled 4.6 percent lower to 1,133.00p, making the company the biggest faller in the FTSE 100, as of 12:29 UTC. The stock has advanced 2.9 percent since the start of the year and around 24 percent over the past twelve months.

The other main major point in Reed Elsevier’s release was the company’s plan to simplify its structure into one unit. Under the current structure, Reed Elsevier comprises two separate parent companies, listed in London and Amsterdam. Following the changes, the company, renamed as RELX, will maintain its dual listing, but all assets owned by the two companies will be transferred into a single new group entity. The company will also remove parent company cross-shareholding and balance the share equalisation ratio between the two parent companies at 1:1.
“We believe that the set of measures that we are proposing will simplify our structure, help clarify the economic interests of parent company shareholders, and increase share price transparency,” the company said.
According to the Financial Times, the 21 analysts offering 12 month price targets for Reed Elsevier have a median target of 1,100p, with a high estimate of 1,300p and a low estimate of 884.00p. As of February 20, 2015, the consensus forecast amongst 27 polled investment analysts covering Reed Elsevier has it that investors should hold their position in the company. This stance has been maintained since 17 March, 2014, when the sentiment of investment analysts deteriorated from “outperform”.
As of 14:36 GMT, Thursday, 26 February, Reed Elsevier plc share price is 1,127.50p.

About the author

Xavier Basil
Born in Angola and brought up in Portugal, Xavier came to the iNVEZZ team via a previous career as a financial services lawyer. With a passion for writing and more investigative pieces, Xavier's contributions are always both both a little more unique in the angle of approach as well as informative.

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