Reed shares slump on debt move

Reed Elsevier announced plans for a share issue to tackle its £5.1 billion debt

Publishing giant Reed Elsevier joined the rush for City cash by announcing plans for a share issue to tackle its £5.1 billion debt.

The company, which employs 34,000 people and targets the science, medical and legal sectors, said the estimated £850 million fundraising was necessary because a major acquisition last year left it with more debt than was prudent.

The move came as Reed said the economic downturn was having an impact on "even our most resilient businesses" as it warned results in constant currency terms were likely to be under some pressure this year and going into 2010.

Revenues in the six months to June 30 rose 3% on an underlying basis to £3.43 billion, while Reed's reported operating profits fell 29% to £316 million.

Analysts said the figures were ahead of expectations, but expressed disappointment at the cautious guidance. Shares tumbled 15% as the dilution impact of the fundraising move also affected sentiment.

It represents the latest in a long line of cash calls in the City, with packaging firm Rexam asking for £350 million earlier this week.

Reed spent £2.1 billion on risk management company ChoicePoint, a provider of data and analytical information to the insurance sector, last year.

The company had hoped to fund the deal by selling its New Scientist and Flight International publishing division, but this plan was dropped in December due to credit conditions and the weaker economic outlook.

As well as the Business Information unit, the company is based around Elsevier, its science and health information arm, as well as Reed Business exhibitions and legal division LexisNexis.

The addition of ChoicePoint boosted LexisNexis revenues and profits in the first half, but this was offset by a weaker performance in legal and corporate markets and most particularly in its US legal directory business.