Reed Elsevier to continue on acquisition trail

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The Independent Online
ACQUISITIONS remain a key objective for Reed Elsevier, the Anglo- Dutch publishing group, according to Peter Davis, joint chairman.

Last year Reed spent pounds 403m on purchases such as the pounds 277m Official Airline Guides, which publishes US airline schedules, and the pounds 76m Editions Techniques, a French legal publisher.

But Mr Davis believes Reed, which has a gearing of about 22 per cent, still has considerable scope to make further purchases. These would probably be in the core area of business and professional publishing with Continental Europe a key area for expansion, he said yesterday.

Pre-tax profits in 1993 rose 30 per cent to pounds 534m on turnover up 14 per cent at pounds 2.8bn. Operating profits rose 17 per cent to pounds 558m; after stripping out exceptionals they improved 19 per cent to pounds 518m.

Currency factors were favourable, however. At constant exchange rates, sales were up 5 per cent, operating profits 7 per cent and pre- tax profits, excluding exceptionals, 9 per cent. Driving the improved profits were new technology and vigorous cost-cutting - margins improved 0.7 per cent to 20 per cent. Revenues were held back by the continuing subdued state of the advertising market, which provides about 34 per cent of turnover.

The top-performing segment last year was professional publishing, whose important imprints include legal publisher Butterworths, and educational publisher Heinemann, where operating profits rose 15 per cent in constant exchange rates to pounds 107m.

Equivalent profits at business publishing, responsible for titles such as Estates Gazette and Variety, were up 13 per cent at pounds 185m.

But scientific and medical, where titles such as the Lancet have suffered from the impact of healthcare reforms, showed only 2 per cent growth to pounds 154m, while the consumer sector - which includes IPC magazines and Reed regional newspapers - showed a 2 per cent fall in real terms to pounds 112m.

Shares in the UK and Dutch quoted arms fell back with the price of the UK company, Reed International, dropping 27p to 878p. Analysts pointed to Reed's caution about the strength of economic recovery in the US and UK and the 'very limited indications of any recovery' in Continental Europe, and to the mention of growing pressures on print costs.

'The figures were good enough,' said one analyst. 'But there wasn't much for the bulls to grab at. It's a solid but quite expensive stock. The ratings are pretty fancy given the growth prospects are only okay.'

Another said: 'There is no top- line revenue growth. It is all cost- driven, and you can't go on doing that forever.'

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