Reed Expects Solid 2001

In remarks made earlier this month at Reed Elsevier's annual meeting, chairman Morris Tabaksblat said the slowing U.S. economy should have little effect on the publisher's science and medical, legal and education businesses, while the negative impact on its business-to-business operations should be "manageable." He said that in 2001, Reed will "move very significantly" toward its target for 2002 of double-digit earnings growth. Commenting on the delay in finalizing the purchase of Harcourt General, Tabaksblat said that he was "disappointed" that the transaction had come under further review in the U.K., but expressed confidence that the deal will be approved.

Reed finished 2000 with revenues of £3.77 billion ($5.61 billion), an increase of 11.1% over 1999. Adjusted operating profit was flat at £793 million ($1.18 billion). Three of Reed's four operating groups had double-digit gains in the year, led by its business segment where revenues rose 13.7%, to £1.67 billion ($2.49 billion). Sales in the education group rose 11.5%, to £202 million ($301 million), while sales in the legal group increased 10.5%, to £1.20 billion ($1.79 billion). Sales in the science and medical group gained 6.5%, to £693 million ($1.03 billion).

According to the company's annual report, Reed executives were encouraged by the performance of its legal group despite a 19% decline in operating profits, which the company attributed to significant investments to upgrade the unit's products and services. In the U.S. legal market, online revenues rose 5%, although that gain was largely offset by lower print and CD-ROM sales as business migrates to the Web. Key initiatives included upgrading lexis.com and launching nexis.com. Reed also began using Lexis-Nexis as a global brand name in 2000 for its legal operations.

In the science and medical group, Reed saw rapid growth in its ScienceDirect series of online products; more than 45% of subscription revenue came from ScienceDirect last year compared with 25% in 1999. ScienceDirect now has more than 1.2 million research articles. Reed is expanding the ScienceDirect line with subject-specific products such as PhysicsDirect and EngineeringDirect. Sales in the medical unit fell 15% due to the sale of Springhouse. The medical division generated 15% of group sales with the science operation generating 85%.

Sales in the education group were led by the U.S sales of the supplementary publisher Rigby, which posted a 37% revenue gain. The American market accounted for 51% ($153 million) of the education group's revenues in 2000.

Cahners Business Information (which includes PW ) generated 40%—about $996 million—of the business group's total revenues last year. Reed Exhibition Companies, home to BookExpo America, accounted for 21%, about $523 million of the group's revenues.

Reed Elsevier Sales by Segment, 1999—2000*

* Sales are in millions of dollars and based on conversion rate of $1= £1.49