First-half profits jump of 22% vindicates Reed Elsevier link: Integration of publishers forges ahead as savings and efficiency boost returns

REED ELSEVIER, the Anglo-Dutch publishing group, yesterday celebrated its first six months as a merged company with a 22 per cent increase in pre-tax profits to pounds 297m.

Peter Davis, chief executive, said the group was 'well advanced' on integrating the two businesses, which formally merged on 1 January. The business publishing arms of the two businesses in the US have been integrated, the medical publishing interests are operating under a single management, and Elsevier's scientific publishing arm is running the Reed scientific business.

But he added that the group had spent as much on integrating the business as it had saved in the six months to June. 'Rationalisation was never a big deal in the merger, it was not a driving force,' he said.

The merger, which created the world's most profitable publishing group, was designed to give it the financial muscle and expertise for acquisitions. Reed is particularly strong in the UK, US and Australia, where it has a range of business and professional publications - including Butterworths, the legal publisher - as well as the IPC consumer magazine group. Elsevier, by contrast, is stronger on the Continent and has extensive interests in scientific publishing.

The group has already made one acquisition - of Editions Techniques, the French legal publisher - and is in negotiations with the administrators of Maxwell Communication Corporation to purchase the Official Airline Guides.

The interim figures were helped by currency fluctuations and a pounds 16m profit on the disposal of Reed's stake in BSkyB. Excluding these, profits were 13 per cent higher while sales rose 1 per cent to pounds 1.27bn. Earnings per Reed share were 21p, or 19.5p excluding currencies and disposals, up from 17.4p last time. The dividend was increased by 3 per cent to 7.5p a share.

Both Reed and Elsevier are still quoted separately, and each owns a share of the merged group. Reed's share of the pre-tax profits was pounds 157m, up from pounds 138m, while Elsevier took 408m guilders, compared with 347m guilders.

The profit improvement was largely due to cost savings and improved efficiency. Best performer was the professional division, which improved profits by 18 per cent to pounds 60m, at constant exchange rates. That was spurred by the educational division, which recorded a 69 per cent increase helped by the national curriculum.

The consumer division produced a 16 per cent increase to pounds 54m, again at constant exchange rates.

(Photograph omitted)

Bottom Line, page 25

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