Reed Elsevier earnings forecast disappoints market

Reed Elsevier, the publishing giant, warned that trading in the science journals market remained tough.

Reed Elsevier, the publishing giant, warned that trading in the science journals market remained tough.

The company's shares fell 3 per cent to close at 473.5p. As well as the news on Reed's science arm, some in the City were disappointed that the company did not raise its earnings guidance for 2004.

Traders said that some investors had felt that Reed was being overly-cautious when it had consistently said that earnings per share growth in 2004 would be "mid to high-single digit". Yesterday Reed reiterated this statement in a trading update, ahead of its full-year results.

Some had expected the group to say that the company's results would come in at the top of this range or even creep into the double-digit growth that the company had achieved in the previous three years. Reed said though that 2005 would see a return to double-digit earnings growth.

Analysts also pointed out that the guidance for this year was at "constant currencies" but, given the dramatic weakening of the dollar, the actual reported results would be considerably lower. About 60 per cent of group turnover comes in US dollars.

The group's Lexis-Nexis legal arm continues to perform well, Reed said, and added that its education and business-to-business publishing businesses should see a recovery in 2005.

Reed's science publishing division, Elsevier, has been in the news amid accusations by some in the academic community of profiteering. The company owns many of the world's leading science and medical journals, including The Lancet.

Reed said: "The scientific research information market remains challenging with minimal increases in academic library budgets.... The scientific journals business operates in an environment of continuing weak funding growth for the majority of customers which does constrain the market opportunities."

Reed said that prices would rise by less than 5 per cent this year. To counter its critics, it added that it would publish 4 per cent more articles in its journals in 2004. Also, in response to claims that it is losing the loyalty of scientists to the alternative "open access" publishing model (where there are no subscription charges), Reed said that articles submitted by researchers for possible publication were up 7 per cent this year.

Usage of Elsevier's ScienceDirect electronic publishing service was up 30 to 40 per cent, to exceed 230 million articles downloaded this year.

Looking forward, Reed said that the renewals process for 2005 science subscriptions "is progressing well".