Harcourt Buy Boosts Sales at Reed, Thomson

Reed Elsevier and the Thomson Corp., two of the world's largest professional and educational publishers, both had solid gains in sales and earnings in 2001, helped in part by their acquisitions of different parts of Harcourt Inc., which they bought last July (News, July 23, 2001 ). Total revenues at Reed rose 21% last year, to £4.56 billion ($6.57 billion), while pretax profit increased 23%, to £848 million ($1.22 billion). Revenues from continuing operations at Thomson increased 18%, to $7.17 billion, and operating profits increased 16%, to $1.32 billion.

Harcourt had the most dramatic impact on Reed's results, contributing approximately $890 million in revenues from the July 13 acquisition date through the balance of 2001. Harcourt added $541 million to Reed's education operations, and $349 million to its science and medical operations. Excluding acquisitions and divestitures, revenues were up 3% and operating profits were up 5%.

According to Reed, Harcourt's education businesses exceeded expectations, with sales rising 12% on a pro forma basis. Revenues in the k-12 market increased 11%, and testing sales were up 22%. The company noted that the trade book division, which is a small part of the education group, had a "weaker" performance than in 2000. Sales in the Reed Educational & Professional Publishing division increased 8%, excluding results from Butterworth-Heinemann, which was moved to the science and medical group. Particularly strong gains were reported by the supplementary publisher Rigby, which is being integrated into Steck-Vaughn.

Reed said it is looking for "satisfactory" growth in the school market in 2002, and expects to outperform a "somewhat dull" market. The company said that, helped by savings achieved by integrating both Harcourt and Rigby, it plans to spend more than $20 million on e-learning initiatives in the year.

In addition to contributions from Harcourt, revenues in the science and medical group were driven by subscriptions to its ScienceDirect online service.

In the legal market, online sales increased 10% in the U.S., a gain that was partially offset by lower print and CD-ROM sales. Sales of Martindale Hubbell directories were also up last year. Overall, legal group sales increased 6% in North America and 10% internationally.

The Harcourt purchase could do nothing to help Reed's business group (which includes PW), where revenues fell 3%. Only Reed Exhibitions, with a 23% sales increase, posted higher revenues in 2001 than in 2000. Despite the decline in revenues, operating margins remained over 15% due to aggressive cost cutting.

Learning Group Sales Up

Executives at Thomson said they couldn't break out Harcourt's contribution because its operations had been fully integrated into existing businesses. However, the company said that the 33% gain in revenues in its Learning group was due primarily to the Harcourt purchase plus gains in the academic and international segments. The Learning group's international revenues doubled with the Harcourt acquisition. The recession hurt the group's corporate training division as corporations tightened their budgets, but Thomson remains optimistic about the long-term prospects for the business. Thomson also has begun to see some softness in the library business of its Gale subsidiary because of growing budget pressures on libraries as tax receipts shrink.

To comply with the Justice Department's requirement that it sell some textbooks, the Learning group sold 74 college texts to John Wiley in the fourth quarter; the texts had generated revenues of $17 million.

Reed Elsevier Revenues by Segment, 2000-2001
($ in millions)¹

Thomson Corp. Revenues by Segment, 2000 2001
($ in millions)