European STM business trends

Science makes money for Europe's information companies

The signs are that 2003 will be a better year than 2002 for most of the leading European providers of information in science, technology, and medicine (STM). An analysis of financial results published so far in 2003 (see table below) shows that most STM information companies have increased their sales in 2003, while cost-cutting exercises, restructuring, and other rationalisation programmes have helped to improve or maintain profits. IRN is expecting even stronger growth in the latter part of 2003.

Reed Elsevier and Thomson continue to set the pace, with Thomson reporting the largest increase in operating profits in 2003 so far, compared to 2002, and Reed Elsevier registering an operating profit margin in STM of 33.9 per cent, well above the industry average. Wiley Europe (including both STM and non-STM sales) has the highest rise in sales so far in 2003, while its margins are also high.

Only Wolters Kluwer has suffered decreases in both sales and profits, although even here there are signs of an upturn: Nancy McKinstry took over as the new Chief Executive at the start of 2003, with a brief to restore the group to financial health after a number of years of debt problems. Net debt has been reduced, and a new three-year strategy announced in October 2003 aims to focus more sharply on key customer segments, and to reduce costs by e240m between 2003 and 2006.

Reed Elsevier, Thomson, and Wiley lead the field in the development of online services. Reed Elsevier now has 75 per cent of its subscriptions (by value) on Science Direct and is continuing to grow online sales, including backfiles and subject collections. The company has accelerated the migration to e-only contracts and, although these produce lower revenues than a combined print and electronic sale, they also reduce operating costs for the company.

For Wiley, more than 60 per cent of global journal subscriptions revenues now come from Wiley Interscience, and Thomson has almost 60 per cent of its revenues coming from online sources. In May 2003, a pay-per-view credit card service was added to Wiley Interscience to broaden the customer base.

Acquisitions have been a key factor behind sales growth in recent months, with many of the leading players increasing their presence in Europe by purchasing more European content. In particular, companies such as Taylor & Francis and Wiley have stated strategies of increasing their market penetration by acquisition coupled with organic growth. The latest example of this was in November 2003, when Taylor & Francis purchased Swets & Zeitlinger B.V., the Dutch-based STM journal and book publishing business divested by Koninklijke Swets & Zeitlinger Holding N.V. The purchase price was €16.75m (£11.5m). This followed the company's purchases of STM players Bios Scientific Publishers Ltd and CRC Press earlier in the year. More can be expected. Wiley's 2003 European sales growth was boosted by the GIT Verlag and A&M Publishing acquisitions.

The most far-reaching corporate event of 2003 in Europe is likely to be the merger of Springer Science+Business Media and Kluwer Academic Publishers. This will create the second largest STM information company in the world. After investigations by the EU authorities, the transaction was legally completed on 16 September 2003, and the merger into one brand - Springer - will officially take place in spring 2004.

IRN's initial estimates for full-year 2003 suggest that STM information sales (including online and print) in Europe are likely to grow by around six or seven per cent, a similar level to 2002. However, restructuring, cost-cutting, programmes, and improved operating efficiencies should boost industry margins compared to last year.

back to main features page
home