Reed Elsevier results show benefit of merger
The improved operating performance reflects efficiencies achieved by both companies over the past year.
The pro-forma results for the year ended Dec. 31, 1992, are the first to bring into line the reporting years of Reed Intl. and Elsevier. Reed is the parent company of Daily Variety.
Pre-tax profit was up 19%, to $ 725 million, and profit attributable to the group was up 15%, to $ 509 million. Because of exchange-rate fluctuations, the results read somewhat differently in Dutch guilders, the home currency of Elsevier.
London media analysts welcomed the results, which, apart from minor technical adjustments, were very close to expectations.
"The figures are spot on and the merger is looking good," said Neil Blackley, media analyst at securities house James Capel.
"The market responded very strongly," added Mark Beilby, of S.G. Warburg. "Peter Davis and Pierre Vinken (chiefs of Reed and Elsevier, respectively) held a very good meeting this morning and managed to get their strategy across very effectively."
Reed shares jumped 13 pence on the London stock exchange to close the day at 656 pence.
A company statement, signed by Davis and Vinken, said in part: "Much has been achieved in the first three months of Reed Elsevier's existence. A number of important decisions have been taken and the fabric of the new organization is taking shape."
Already some publications have been rehoused within the enlarged group and analysts note that further operating economies are expected this year, the first full year of merger.
"Cost savings have been identified in other parts of the business, but in the current year much of the benefit will be masked by the restructuring costs that follow such a significant merger," noted the Davis/Vinken statement.
In their presentation, Davis and Vinken were cautious about prospects for the coming year. But in their joint statement they added: "Although we expect little help from better economic conditions, the current-year performance should again show an improvement as a result of greater operating efficiencies, new product developments and benefits from the merger. Results from the first two months support this expectation."
Both Beilby and Blackley expect Reed Elsevier to make further acquisitions in the near future. Beilby said the company, which has very strong cash flow and little debt, could easily raise up to $ 1.2 billion for a deal. It has often expressed an interest in the Official Airlines Guide, although lesser-known opportunities in electronic publishing could also be on the wish list.
