Reed's investment plans send shares soaring

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The Independent Online
SHARES IN Reed Elsevier, the Anglo-Dutch publishing group, yesterday shrugged aside a fresh profits warning to close 16 per cent higher after the company unveiled plans to boost investment in new media by up to pounds 200m.

Crispin Davies, chief executive of Reed Elsevier since September, said the investment would target new product development and marketing, particularly in Internet-based information services. One aim is to improve search-engine resources and other Web tools.

"We are looking to fund the majority of this investment through a rigorous review of our cost base, which will result in exceptional restructuring charges of not more than pounds 250m, which will be taken across the current year and next," he said.

A strategic review, to be concluded ahead of schedule in February, has reaffirmed the company's focus on its three principal publishing markets - scientific, professional and business. "I believe all have growth potential and there is a clear opportunity to add value," Mr Davis said.

Reed International shares rallied 59.75p to 443p, rebounding from near six-year lows, in heavy buying. Even so, the publisher is well below its 12-month high of 630p last winter.

Analysts supported the steps taken by Mr Davis. "He is doing exactly the right thing," said Paul Richards of WestLB Panmure. "He is addressing the cost base and ploughing all the savings into new product development, marketing, stronger management and, above all, the Internet."

In the trading statement, Reed Elsevier said 1999 earnings "continue to be affected by less favourable market and competitive conditions and investment". Lexis-Nexis, the online information distributor, is showing only "small" increases in revenues, while revenues at Cahners Business Information "remain flat". Second-half earnings are expected to fall below the pounds 360m recorded in the second half last year.