Reed Elsevier shares suffered their biggest fall for almost two years after the owner of Variety and the LexisNexis database warned that its education publishing business will miss sales targets this year.
The shares led the list of FTSE 100 fallers yesterday, with a fall of 29p to 523.5p, despite reassurances from the Anglo-Dutch publisher that overall group sales are still on course to rise 5 per cent and earnings per share growth to top 10 per cent in 2005.
Shortfalls at the US business Harcourt Education - previously seen as one of the strongest parts of Reed's business - were due to surprisingly slow demand for new products and spending cutbacks at schools.
The London-based Reed cautioned investors that there is little chance of recovery this year. Its chief executive Sir Crispin Davis admitted that some of its products had been out of step with the US government's No Child Left Behind education programme. Up to now, Sir Crispin had been credited with presiding over one of the best-performing UK media companies.
Before yesterday, City analysts had long compared Harcourt favourably to a similar business owned by Pearson, and its US rival McGraw Hill.
However, earlier this month Pearson revealed that sales jumped 10 per cent in the first nine months of this year, helped by higher school textbook sales.
Sir Crispin looked to steady investors' nerves by promising that things were being put right at Harcourt, saying: "We know exactly what the issues are and we have moved to fix them. Our business is performing well overall, with organic margin growth building and margin expected to improve through continued cost efficiency."
Analysts appeared unimpressed. They pointed out that yesterday's news would trim 1 per cent from total group revenues this year and said it raised questions over Harcourt's competitiveness. One described the Harcourt results as a "major disappointment".
In contrast, LexisNexis is expected to show organic revenue growth of 6 per cent for the full year, while Reed's other divisions are also outstripping expectations. Sales of its Seisint database are expected to jump one-fifth.