Reed shares dive on profits warning

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The Independent Online
REED INTERNATIONAL, the world's largest publisher by stock market value, came under fire from City analysts yesterday when it warned profits this year would fall below those of 1998, triggering a 6 per cent drop in its share price.

The shares fell from 481p to 453.5p, wiping pounds 300m from its market value, when the group said cut-throat competition would dent profits at two of its key divisions - Lexis-Nexis, a legal database unit, and Cahners Business Information, a business-to-business publisher.

A number of analysts expressed annoyance that the group had failed to clarify its profits outlook ten days ago, when the Dutch newspaper De Telegraf predicted a 10 per cent fall in profits in 1999.

The newspaper reported on 28 May that the company was telling analysts at a meeting in New York of the depressed profits outlook, prompting a sharp fall in its share price.

The Anglo-Dutch publisher, jointly owned by Reed International and Reed Elsevier of the Netherlands, then declined to comment except to deny an analyst's meeting had taken place. The share price recovered, only to fall again yesterday after the profits warning.

Julien Roch, an analyst at Lehman Brothers, said: "This was badly handled because of the rumours in the Dutch press. It lowered the trust regarding the company."

Louise Barton, an analyst at Investec Henderson Crosthwaite, said she was unhappy the company waited until yesterday to confirm the information. "What's happened is someone leaked what they were going to say at this presentation. They should have actually come clean at the time of the rumours in the market the other day."

Nigel Stapleton, executive chairman of Reed, said the group could not comment at the time of the report because key decisions affecting profits had not yet been taken.

He said Reed had needed to consider whether to cut costs or continue investing in the two affected businesses. "We were not yet convinced that continuing with [developing the businesses] was the right thing to do. When one is ramping up our costs to the extent that we are, every management team would be expected to consider all options carefully before a decision is made."

Reed said Lexis-Nexis failed to improve profits as hoped amid stiff price competition from its rivals in the US. Revenues at Cahners were hit by weaker-than-expected demand for advertising.

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