Bluechip: Reed unravels the Web

Reed Elsevier, the Anglo-Dutch publishing group, didn't set the markets alight when it revealed a meagre 1 per cent profit rise in its recent interim results. Even so, the story the company has to tell is an interesting one as it dovetails neatly two obsessions of the market: the world of media, and of information disseminated over the Internet.

Reed is a global heavyweight in publishing, although it has shied away from high-profile areas like newspapers or TV. Instead, it has concentrated on trade and consumer magazines. What such publications may lack in kudos they more than make up for in profits; to the professional subscribers, they count as a "must have" purchase. For example, Lexis is an online search service for lawyers. Three years ago, when Reed bought it, its margins were 11 per cent; they now stand at 20 per cent.

The big question is whether Reed's heavy investment in the Internet will pay off. To date, its moves have at least been tactically astute. It is now Microsoft's partner in scientific, professional and business publishing and information. And it is using the expertise it gained from Lexis to develop ScienceDirect, an online system for accessing all the information in the hundreds of scientific titles Reed publishes.

Moves to boost electronic delivery of information have already made an impact on the bottom line - 20 per cent of revenue being generated from this source now, against 5 per cent five years ago. This share should grow substantially, although the group acknowledges that the costs will be significant.

Reed has also spent pounds 600m on acquisitions this year alone, and chairman Nigel Stapleton has said that money will continue to be spent in this way rather than being returned to shareholders. With a war chest of pounds 1.87bn it is not short of firepower, and a few more juicy deals could well set the shares off on another run.

While investment costs have slowed the growth in profits, if one strips out the effect of a strong pound, the result looked more appealing - operating profits rising by 10 per cent to pounds 459m.

Reed is also getting out of book publishing, with a sale of the children's book division expected any day now. With sterling relinquishing its gains against the mark, currency effects in the second half should be less of a bother. Market forecasts look for a full-year figure of pounds 850m, or a forward multiple of just below 18, rising to perhaps 20 for 1998. That may seem high, but Reed looks as if it could weather any storms in the wonderful world of online business. The shares remain a strong hold, shading towards a buy for the long term.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with excess, cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings