Reed Elsevier to make fresh disposals as profits slide

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By Rachel Cooper and Rowena Mason

Published: 7:27PM GMT 18 Feb 2010





Reed Elsevier

Erik Engstrom, Reed's new chief executive, warned that the first half of 2010
would also be challenging, because companies are cutting back on
subscriptions to magazines and information services.

"The performance of most of our subscription businesses tends to lag
economic recovery," he said. "In marketing and advertising the
rate of decline should start to slow down, but we are going to carry on
restructuring and looking at disposals."

Full-year pre-tax profits at the publisher sank 29pc to £435m from £617m the
previous year. Overall sales at Reed rose 14pc to £6.07bn on foreign
currency benefits, but advertising revenues fell by 21pc.

The Anglo-Dutch publisher, which has been in talks to sell dozens of US trade
magazines to individual publishers, said revenue from advertising and
promotions remained difficult during the economic slowdown.

A sale of its entire trade magazine division, Reed Business Information, was
abandoned last year, because bids were not high enough.

Mr Engstrom, who took over as chief executive in November after his
predecessor Ian Smith's tenure lasted just nine months, said the results
were "relatively robust" given the depth of the recession.

"In the near term, some of our customer markets remain under pressure but
longer-term our prospects are encouraging," he added.

Reed has recently cut £227m of costs in a two-year savings programme.

It increased its full-year dividend payment of 20.4p by 0.5pc for the
London-listed stock exchange, to be paid on May 21.

Anthony Habgood, chairman of the company, said that the its balance sheet was
in "good shape". Last July, the company raised £829m after Mr
Smith ordered a rights issue just four months after taking up the helm.

The outlook was "subdued as expected", Panmure analyst Alex DeGroote
said, keeping a buy rating and 600p target price. But Numis analyst Lorna
Tilbian noted the group's "strong" earnings. She kept a hold
rating on the stock, while setting a target price of 483p.

Giasone Salati, an analyst at Execution Noble, said there was likely to be a
shift in market shares in legal and educational publishing from Reed
Elsevier to Pearson.

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