Reed Elsevier sees Net revenues soaring

Reed Elsevier, the Anglo-Dutch publisher, yesterday predicted that its internet-based revenues would soar 20 per cent this year, to £1.2bn. It is investing heavily in developing its online services, making all of its print publications available over the internet, and online revenues have grown tenfold in the past five years.

Reporting interim profits, the group scotched fears that its science arm had suffered from a shake-up in the science publishing market as it called an end to the media downturn.

Sir Crispin Davis, the chief executive, said there had been "little impact" from a move to make scientific journals freely available to everyone. Reed Elsevier, which is clinging to the traditional science-publishing model that sees companies charge hefty subscriptions to those who want to access journals, relies on its science publishing division for 40 per cent of its profits. "We have seen accelerating growth in the number of [science] articles being submitted, up 5 per cent," Sir Crispin said. "We are not complacent. But you have to keep it in perspective. Although it's generated a lot of publicity in the market it has had a relatively small impact."

He was speaking as the group reported a 3 per cent rise in pre-tax profits for the six months to 30 June. Underlying pre-tax profits rose 5 per cent to £433m, ahead of expectations, although the weak US dollar hit its turnover, which slipped 3 per cent to £2.3bn. Its shares, which have suffered from fears that the so-called "open access" shake-up in scientific publishing could spell the end of Reed's high margins, rose 5p to 481p.

The group predicted accelerated revenue growth for the rest of year as the advertising market improves, particularly in business-to-business publishing. "We are seeing evidence of a turnaround, which is the first time for three years I have been able to say that," Sir Crispin said, highlighting particularly strong growth in the US and UK magazine markets. "The recruitment market in the UK is now growing quite well," he added.

The group reiterated its guidance of above-market revenue growth and mid-to-high single digit earnings per share growth at constant exchange rates this year. In 2005, it expects its earnings to grow by double digits, boosted by a pick-up in the US education market.

Sir Crispin said the company would continue to spend its $500m of free cash on bolt-on acquisitions. "Nearly all of these will be online."

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