Re: Elsevier profit

[odlyzko@dtc.umn.edu (Andrew Odlyzko)]

Extensive financial data about Elsevier is available on their Web site,
<http://www.reed-elsevier.com/>, by following the link to the "2002 Annual
Review and Summary ..."  If we look at Reed Elsevier Annual Review 2002
(PDF version, say, as I found the HMTL version hard to navigate), we do
not see anything like the 43% net profit figure cites by Robert
Michaelson.  Compared to 2001, "adjusted pre-tax profits" increased 11%.  
(This is at constant currencies, one of the many accounting details I
won't go into here.  I will also use the adjusted operating profit, AOP,
figures for profits, since they avoid the amortization of goodwill, etc.)

Perhaps the Wall Street Journal story Robert Michaelson cites refers to
quarterly results.  In any event, citing just rates of increase is often
misleading.  The 2002 Annual Review gives the following data for the four
main segments of Reed Elsevier in 2002, all revenue and profit figures in
millions of euros:

 AOP = adjusted operating profit
 profit margin = AOP as fraction of revenues


                     revenues   AOP    profit margin    

Science & Medical     2,059     682       33.1%

Legal                 2,145     456       21.3

Education             1,579     291       18.4

Business              2,199     372       16.9


Thus all four divisions are very nicely profitable, with STM extremely
profitable.

The discussion of Science & Medical in the 2002 Annual Review says that
"[r]evenue and adjusted operating profits increased by 29% and 26%
respectively at constant exchange rates, or, underlying, by 6 and 11%
including the Harcourt STM business on a proforma basis.  Both the Science
and Technology and Health Sciences divisions saw underlying revenue growth
of 6%." That says that most of the growth in this area came from the
acquisition of Harcourt.  The operating margin of 33.1% was (according to
the 2002 Annual Review) "0.5 percentage points lower than in prior year,
reflecting the inclusion of the lower margin Harcourt STM business for a
full year.  The underlying margin improvement on a proforma basis was 1.5
percentage points."

Andrew Odlyzko