Shares in Reed International, the UK holding company, lost 6 per cent of their value, dropping 32.5p to 532.5p after Reed Elsevier reported a 6 per cent fall in underlying pre-tax profits for the year to last December. At the same time Nigel Stapleton and Herman Bruggink, the joint chief executives, said "1999 will not be a year of significant profit growth."
However, the stock market reaction surprised analysts, most of whom had already been forecasting flat profits for the current year. Some said the share price reaction was more likely to be the absence of the appointment of a new chief executive.
Reed has been in limbo since last summer, when it announced plans to appoint a single chief executive and chairman. Neither Mr Bruggink nor Mr Stapleton are in the running for the job. Yesterday, Mr Stapleton would only say that the selection process was at "an advanced stage."
Jonathan Newcombe, chief executive and chairman of Simon & Schuster, the US publishing house, is thought to be a leading candidate.
According to observers, the new chief executive's main task will be to revive Reed Elsevier's sales growth. Yesterday's results showed that turnover in Reed's continuing businesses grew by just 6 per cent in 1998. The company's Lexis-Nexis online legal database reported revenues up just 3 per cent as a result of competition with rival Thomson.
Overall, profits were hit by Reed's strategy of investing heavily in preparing its existing publications for electronic publishing. Reed invested pounds 80m last year, and spending is likely to keep running at a similar rate in future years.
Henderson Crosthwaite analyst Louise Barton, who is maintaining her 1999 profit forecast at pounds 777m, said: "All the bad news is out of the way; the current weakness is an opportunity to buy the stock."