Reed Elsevier expects to hit its target of double-digit earnings growth in both 2001 and 2002, while revenues will grow at a faster rate than market averages next year, Crispin Davis, CEO of the media giant said at UBS Warburg's media conference. The company also reaffirmed its projections in a financial update issued earlier this month. Davis credited the creation of a "balanced portfolio" for Reed's ability to deliver strong gains in a weak economy. The company has lowered its presence in the business-to-business market through the sale of a number of trade magazines and upped its stake in the education and science publishing markets with its acquisition of Harcourt. "We're in the four sectors [science, education, legal, B2B] that we want to be in," Davis said.
Of the four market segments, only the B2B group (which includes PW) is being hit hard by the recession, Davis reported. Revenues will be down less than 5% in the year, while operating earnings will be off by slightly more than 5%, excluding the effect of acquisitions and divestitures.
The education segment will have a good 2001, led by Harcourt, which won a wide number of state adoptions in the year. Davis said Reed will keep its focus on the k-12 market and will look to exploit opportunities in testing, while building its capacity to deliver online teacher training and e-learning. Davis said he doesn't believe states will institute "meaningful" cutbacks in education spending in 2002, and predicted that Reed's education group will outperform the projected industry sales increase of 2%-4% next year.
The move to greater electronic delivery of both scientific and legal information has paid dividends in both those sectors, Davis said. Renewal rates at Elsevier Science have improved, helped in part by higher usage of the ScienceDirect online service, which is used by 64% of subscribers. The unit also now has 100 sales reps selling its products globally and has become much less reliant on third-party sales efforts, Davis said.
Growth in the legal market is being led by the former "problem child" Lexis Nexis. Over the last few years, Reed has invested about $200 million, investments that are now paying off, Davis said. Lexis has upgraded its electronic products, increased its marketing efforts and expanded its sales force from 450 to 700 reps.
