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UPDATE 2-Reed Elsevier cuts costs to bolster growth
February 16, 2012 / 7:35 AM / 6 years ago

UPDATE 2-Reed Elsevier cuts costs to bolster growth

* Shares rise, outperform weaker FTSE 100

* 2011 adjusted pretax profit 1.39 bln pounds vs 1.37 bln forecast

* Says macro economic outlook uncertain

* Sees another year of underlying revenue, profit growth

* Sees modest growth at Elsevier, legal market subdued

By Paul Hoskins

LONDON, Feb 16 (Reuters) - Anglo-Dutch publishing and events group Reed Elsevier reported a rise in full-year profit and said it expected cost cutting and small acquisitions to help generate more growth in an uncertain economy this year.

“The macroeconomic outlook remains uncertain, but ... we expect to deliver another year of underlying revenue and profit growth in 2012,” Chief Executive Erik Engstrom said in a statement on Thursday.

The company said it would maintain a “relentless focus on process efficiency” in the coming year to help it deliver that growth although Engstrom declined to say during a conference call with reporters whether that would involve job cuts.

The publisher of scientific, business and academic information said adjusted pretax profit rose 9 percent to 1.39 billion pounds ($2.18 billion) in 2011, slightly ahead of the 1.37 billion pound average of 23 analysts’ forecasts compiled by the company.

Revenue at the group, which also runs the world’s largest exhibition business, dipped 1 percent to 6.0 billion pounds although it was flat once the impact of foreign exchange fluctuations had been stripped out and underlying growth was 2 percent.

Steady growth at more economically resilient parts of its business such as academic publishing and events are also helping offset subdued spending by legal clients and uncertainty over government spending.

It’s main Elsevier business, which provides science and health information and accounts for 47 percent of group profit, reported underlying operating profit growth of 4 percent and predicted “continued modest underlying revenue growth” in 2012.

Its LexisNexis Risk Solutions business reported 12 percent profit growth and predicted good revenue growth in insurance and business services but continued tough conditions among government clients.

The LexisNexis Legal & Professional division, which competes with Thomson Reuters’ Westlaw, said it had returned to revenue growth last year, recording a 1 percent rise after a 2 percent drop in 2010.

“Legal markets remain stable but subdued, limiting revenue and margin growth potential in the short term,” the group cautioned.

Shares in Reed were up 0.8 percent at 538.5 pence in London by 1024 GMT, outperforming a 0.7 percent weaker FTSE 100 index .

Analysts at Numis described the results as “slightly ahead of consensus” and said the company’s outlook statement was consistent with their expectations, prompting them to leave their 2012 earnings estimates unchanged.

“We view the results and outlook statement as solid and retain our ”add“ recommendation and (share) target price of 576 pence,” they wrote in a note to clients.

Analysts at UBS said the results should reassure investors.

“The portfolio looks in robust shape and we believe the shares should continue to see gradual re-rating as the company move towards delivering the double-digit EPS growth it has in the past,” they wrote.

Engstrom told reporters that the group had no plans to sell any of its main five operating businesses but that it would continue making small disposals within all divisions as it has done over the last two years.

In terms of growth, Engstrom said the focus remained on organic growth supplemented by small acquisitions.

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