Bloomberg News

Reed Elsevier Says 2006 Profit Rises on Digital Services Growth

February 15, 2007

Reed Elsevier Plc, publisher of Variety magazine and owner of the LexisNexis databases, said full-year 2006 profit rose 35 percent on growth at its online information and digital services.

Net income for the 12 months to Dec. 31 rose to 623 million pounds ($1.22 billion), or 25.6 pence per share, from 462 million pounds, or 18.6 pence per share, a year earlier, London- based Reed said today in a Regulatory News Service statement. Profit was higher than 582 million pounds, the average of six analyst estimates compiled by Bloomberg. Revenue rose 5 percent to 5.4 billion pounds, from 5.16 billion pounds.

Reed said it plans to sell its Harcourt Education division and focus on ``growing digital opportunities'' in the science and medical, legal and business units. The proceeds of a sale will be returned to shareholders, Reed said.

Reed cut its profitability forecast for its education unit Nov. 16 because of an ``underperformance'' in its educational testing unit. London-based Reed competes with McGraw-Hill Cos., Houghton Mifflin Co. and Pearson Plc in the provision of text books, marking of tests and online materials.

The Harcourt unit accounted for about 11 percent of the company's adjusted operating profit last year.

The company said Nov. 16 that sales for the full year would rise 5 percent, excluding purchases and asset sales, and earnings per share would increase 10 percent.

To improve performance Reed should consider selling its business-to-business division, Paul Richards, an analyst at London's Numis Securities, said before the results were announced. This could raise 3.5 billion pounds, which would enhance earnings per share by 6 percent through the company buying back 25 percent of its equity, Richards said.

Analysts at Credit Suisse said Jan. 10 that Reed may become the target of a buyout firm due to its low level of debt and strong cash flow. The company could provide a ``very healthy return for a private equity investor,'' the analysts said.

To contact the reporter on this story: Mark Herlihy in London at

To contact the editor responsible for this story: Zimri Smith at

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