Sunday 21 December 2014

Digital content giant making news – but not the headlines

Dr John Lynch

Published 24/03/2014 | 02:30

HANOVER, GERMANY - MARCH 10:  A Visitor touches a surface tablet at the Microsoft stand at the 2014 CeBIT technology Trade fair on March 10, 2014 in Hanover, Germany. CeBIT is the world's largest technology fair and this year's partner nation is Great Britain.  (Photo by Nigel Treblin/Getty Images)
A Visitor touches a surface tablet at the Microsoft stand at the 2014 CeBIT technology Trade fair

I know it is not the sort of thing that a serious investor should admit, but I find myself struggling to keep track of the big players in the field of digital technology.

So when someone asked me recently to make a stab at naming the four biggest digital content providers, I had a decent shot at naming two of them, Google and Bloomberg. If I'd been given long enough, I might have guessed the name of the third, China Mobile. But the fourth of those global big-hitters would have foxed me completely. It's the one-time printing giant Reed Elsevier, yet another major corporation to have reinvented itself in the wake of the digital revolution as the real value of information began to be appreciated.

Reed Elsevier is the result of a merger in 1993 between UK company Reed International and the Dutch publishing company Elsevier NV. Today the company is one of the world's largest providers of information and has close to 20pc of the global information market for legal, medical (including the 'Lancet') and scientific information and also operates the largest US public record data base. It is also a significant player in the exhibitions business.

Altogether, Reed Elsevier has 28,000 employees, about half of whom are in the US. The company has stock market listings in both London and Amsterdam.

Since the beginning of this century, Reed Elsevier has been migrating away from its dependence on print and moving to paid electronic data. In 2000 over two-thirds of company revenue came from print. Now print accounts for one-fifth of the business and in excess of 80pc of the group's income comes from digital content.

But the company turnaround strategy has not been without pain. It has disposed of 26 businesses and purchased 20 new ones, pocketing over £100m (€120m) in the process.

The company markets its information to the scientific, technical and medical markets under its Elsevier brands. It provides information and tools, medical journals and data bases to help improve knowledge in the healthcare and scientific sectors.

Lexis Nexis is the brand name for its legal and risk solutions. It is the world's leading provider of legal and regulatory information for legal, corporate, academic and government customers.

Reed Elsevier is valued at €12bn, yields 2.7 and has a P/E of 19. The share price is €15.38 having retreated from its high of €16.30 some months ago. Its sales in the last five years have remained static at €7bn. But in the same period pre-tax profits have moved from €0.5bn to €2bn.

In the last five years Reed Elsevier's dividend payout increased by 25pc. Good news for investors in the Anglo-Dutch group is that it plans to grow organically and so has no need for large-scale acquisitions.

NOTHING PUBLISHED IN THIS SECTION SHOULD BE TAKEN AS A RECOMMENDATION, EITHER IMPLICIT OR EXPLICIT, TO BUY OR SELL ANY OF THE SHARES MENTIONED.

Irish Independent

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