Shares in Reed International, the group's UK-listed holding company, dropped 10.5p to 443p as Reed Elsevier forecast that pre-tax profits for the year were likely to be pounds 770m - lower than the expected pounds 800m.
Reed blamed the shortfall on lower sales as a result of the Asian crisis and higher spending on its electronic publishing businesses. "We had already signalled a weakness in the economy and an increased investment in our cost base," said Mark Armour, Reed finance director. "Over the past two months the economic situation has deteriorated."
He said greater competition in the US was squeezing Lexis-Nexis, its online legal and business database supplier.
Analysts responded to the news by slashing their profit forecasts for 1999 from about pounds 845m to pounds 800m.
Louise Barton of Henderson Crosthwaite said: "We knew profits would be down. It's the scale of the downturn that's the surprise."