Reed tells chief executive Smith to pack his bags as City cuts profit forecasts

Nick Goodway
11 Nov 2009

Reed Elsevier, publisher of Farmers Weekly and New Scientist, has parted company with its chief executive Ian Smith after less than a year in the job.

In the City, Reed shares slumped 4% or 19½p to 465p as analysts slashed their profit forecasts by as much as 10%.

In a terse statement the Anglo-Dutch company said Smith had resigned “by mutual agreement and has with effect from today stepped down from both boards.”

Smith, 55, took over from Sir Crispin Davis who had run the publishing empire with a firm rod for the previous decade, in March of this year. He was briefly chief executive of builder Taylor Woodrow where in 2007 he forged its disastrous merger with rival housebuilder George Wimpey. Anthony Habgood who became chairman of Reed in July said: “Ian has had the difficult task of leading Reed Elsevier during unprecedentedly turbulent economic times.”

Smith will leave with a pay-off of £1.1 million. His basic salary was £900,000. His replacement is Erik Engstrom who has been chief executive of Elsevier — the scientific and medical publishing division — since 2004. He will paid a salary of £1 million a year which could rise to as much as £4.5 million if he hits long-term bonus targets.

Engstrom, 46, was considered for the top job two years ago at the very start of planning for a successor to Davis. But at that stage it was decided he was too young and also he had only been with the company for three years.

Today Engstrom said: “I am delighted to be leading Reed Elsevier. The business is strongly positioned in attractive markets and I am confident we have the resources and ambition to be highly competitive.”

A spokesman for Reed said: “Both Ian and the board felt that it wasn't the right role for him in the current economic circumstances.”

Since his arrival in the summer Habgood has met most of the publisher's major shareholders some of whom have been unhappy with the company's poor relative share price performance over the past 18 months.

Today's trading update from Reed said that both advertising and promotion markets remained tough in its second half. It also warned that it expects a “modest reduction” in operating margin for the year.