Trouble at T’ Mill — or Case of Permanent Stasis?

This week we received via one of our sources, Reed’s financial wind up figures for 2013 and also in that document their comparison with the group’s 2012 figures. Even to a numbers illiterate like myself it’s fairly obvious that Lexis Nexis may well be generating some revenue but profit margins are negligible. Lexis capital expenditure compared to the other members of the Reed Group is also way out of whack as we’ll discover.

So first up …..

Legal Year to 31 December 2013
2013  £m 1567
2012 £m 1610

Change Constant Currency -4%
Change Underlying +1%

Revenue is up, true, but only by £m43. Given…. it’s not chicken feed but for a global business with its fingers in every law firm and financial company on the planet I can’t say I’m that impressed and it certainly doesn’t reflect those 15% revenue increases year in year out from around 1995 through to 2008.

Adjusted Operating Profit
Legal Year to 31 December 2013
2013 £m 238
2012 £m 234

Change Constant Currency +1%
Change Underlying +5%

Now onto …..

Adjusted Operating Profit

Legal Year to 31 December 2013

Previously unallocated items will be attributed to the business areas
• Other business costs relating to shared activities and resources will be allocated between businesses on the basis of usage and benefits derived

Adjusted Operating Profit
New Method £m250
Old Method £m238

New Method 15.9 %
Old Method 15.2 %

I know all companies play with numbers to make their operating profits look better. I’m sure the word “efficiency” was used in many internal documents and emails, but here it just smells like desperation especially as the profit margin is only improved by tenths of a % through this re-imagination.

And now onto what really seems to be hampering Lexis compared to the other group members.. Their capital expenditure:

Capital Expenditure By Business Area

Legal: Year to 31 December
% of Revenues 10%

% of Revenues 10%

If we compare this against all of the other business units in 2013 we see more than a marked difference:

  • Scientific 4%
  • Risk Solutions3%
  • Business Information 3%
  • Exhibitions 2%

Yet again the comparison says it all

And now onto……

Underlying revenue growth across business areas

Exhibitions +7%*
Legal +1%
Scientific, Technical & Medical +2%
Business Information +4%
Risk Solutions +8%

It’s obvious things are tight for everybody (except conferences) but Legal is still at the bottom of the pile.

And finally from the report we will leave you with their own words on 2014 outlook and even Reed can’t really dress up a turkey.

Legal – Underlying revenue growth

+1% +1% +1%
2011 2012 2013 76% electronic

  • Underlying revenue growth maintained
  • Subdued US and European markets
  • Growth in electronic product usage and revenues; continued print declines
  • Roll out of new platforms and products progressing well
  • Margin expansion reflects process innovation and initial decommissioning of old infrastructure

2014 Outlook: Continued roll out of new platforms and products and focus on process improvement. Customer markets remain subdued, limiting scope for underlying revenue growth

So…. all in all not too positive and this isn’t helped by two other pieces of information we received in this week from sources.

Firstly we’ve been supplied a basic outline of senior management bonus structure at Lexis. We’d suggest the numbers don’t really reflect performance at the company over the last 36 months. Time for Reed to get somewhat stricter. As our source points out…”Life may suck for the peons at Lexis and revenue may be on a downward spiral but at the top things are going amazingly well.“

Here’s the incentive statement for executive bonuses at Lexis:

  • LN Legal & Professional Cash Flow: 112% achieved giving 175% of the base bonus
  • LN Legal & Professional Profit 100% achieved giving 106% of base bonus.
  • LN Legal & Professional Revenue 98% achieved giving of 76% based bonus.

As our source points out ….”If your bonus was weighted towards cash flow and profit, you came out a big winner.”

Secondly, as they say in the late night ads “But That’s Not All”. The company have also served us another rather odd set of circumstances. We learned on 27 February via the CRIV blog at that:

Lexis Advance adds Law360 material

In the latest update to Lexis Advance, law school subscribers now have access to Law 360 materials. Law 360 is a tool that provides “breaking news” in over 30 practice areas, including corporate, tax, government contracts and securities law. According to Lexis, over 150 articles per day are released. The Lexis website provides instructions for setting up Law 360 alerts using your Lexis Advance account.

Yet as most of us will know they bought the company nigh on exactly two years ago. Here’s the press release they sent out at the time:

LexisNexis Acquires Law360 Press Release…

Addition of Law360 brings highly regarded fast turnaround delivery of trusted legal news and analysis to LexisNexis services

March 20, 2012 — NEW YORK, March 20, 2012 – LexisNexis ( today announced that it has acquired Portfolio Media, the parent company of Law360® (, an online provider of speedy and trusted legal news and analysis for business lawyers, primarily in the United States.

“Breaking legal news and analysis are critical for legal professionals as they drive success for their businesses and clients,” said Bob Romeo, CEO of Research and Litigation Solutions at LexisNexis. “Law360 is a key element of our growth strategy because it adds legal news and analysis, a crucial part of an attorney’s workflow and a key entry point to legal research.”

Law360 publishes breaking news and analysis with a particular focus on high-stakes litigation across more than 30 practice areas. This content is distributed through online daily newsletters that are read by well over 100,000 law firm and business professionals ranging from litigators, corporate counsel and transactional attorneys to law librarians and legal administrators.

“We are excited to have our premier legal news and analysis offering join the LexisNexis® family. We see it as a great opportunity to extend our reach, expand our portfolio of content, and create new and innovative ways to deliver it to customers,” said Marius Meland, co-CEO and co-founder of Law360. Headquartered in New York City, Law360 was founded in 2004 by Meland and co-CEO Magnus Hoglund. They will continue to run the company as a stand-alone business, while leveraging the content and analytical resources and distribution of LexisNexis.

Law360 distinguishes itself through the unique combination of speedy delivery of more than 130 original legal news stories daily, the journalistic standards of its experienced editorial team, and its content generation platform that tracks in real-time dockets and regulatory filings – enabling reporters to break major developments in litigation, deal making and legislation before anyone else.

The acquisition of Law360 is part of the continuing LexisNexis commitment to provide critical legal and business content to help customers increase productivity and achieve better outcomes for their organizations and clients.

As sources have told us the New Lexis platform that R-E spent $700,000,000 on is so poorly designed that it is now taking nearly two years to get new content loaded on it!

Remind me of the length of time it took to get new information up on MH. Even MH wasn’t that bad though. And I’m told if you go through announcements and implementation press releases you will find that this is the normal period of time it takes to get anything new loaded on Lexis Advance.

So . . . as much as Lexis management may whinge and whine about market conditions and so on and so forth the simple fact is that they are earning less than their brothers and sisters, spending more than them, and being rewarded handsomely for it.

As the MC5 once said:


  1. The numbers are much worse than Sean reports. Reed-Elsevier claims “underlying revenue” increased slightly this year. However, these is no standard definition of “underlying revenue”. Companies report underlying figures to set expectations. After a one time sale of assets, a company might report their underlying profits excluding those resulting for a sale. In that way the company is saying “Don’t expect this every year.”

    At LexisNexis the actual revenue is has been down every year for the past three years. Yet every year, Reed-Elsevier has claimed an increase in underlying revenue at LexisNexis.

    There is a growing gap between the actual revenue at LexisNexis and the “underlying revenue” increases that R-E is reporting each year.