Reed faces pounds 200m penalty
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Your support makes all the difference.Reed Elsevier, the Anglo-Dutch publishing group, yesterday announced that the cost of compensating advertisers who were overcharged for space in its hotel and airline directories was likely to reach pounds 200m.
The scandal, originally revealed by Reed in a trading statement in September, relates to the exaggeration by Reed Travel Group of circulation figures for its directories between 1991 and 1997. Following an investigation involving an army of accountants, lawyers and circulation auditors Reed has put a compensation package to its advertisers.
However Reed said the charge and the subsequent write-down of the intangible assets of Reed Travel Group, both of which will be taken against 1997 profits, would not affect the terms of its merger with Wolters Kluwer, the Dutch publisher.
Reed has yet to decide by how much it will write down the assets of Reed Travel Group, but the finance director, Mark Armour, said the adjustment, which does not affect cash flow, would be "substantial". On 31 December 1996, Reed Travel Group had intangible assets of pounds 472m. Analysts expect them to be written down by between pounds 200m and pounds 250m. Shares in Reed International, the UK-listed holding company for Reed Elsevier, firmed 13p to 653p.
Meanwhile, Reed also said it had decided to split up Reed Travel Group and distribute the various parts among its other businesses. The Hotel Directories and Travel Business Magazines arms would become part of Reed Business Information in the US.
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