Pearson Plc Interim Results (unaudited) Six months ended 30 June 2000
- Sales up 18% to £1,545m
- Operating profits* up 32% to £148m
- Adjusted earnings per share up 41% to 10p
- Interim dividend per share up 7% to 9.2p
- Continuing operations before goodwill, exceptional items and Internet enterprises
- In a separate announcement, Pearson is announcing today a $2.5 billion tender offer for National Computer Systems (NCS), America's leading commercial testing and educational services company. The offer is recommended by the NCS board. NCS will combine with Pearson Education to create a world leading integrated education company. The acquisition is to be funded by a 3 for 11 rights issue at £10 per ordinary share.
- Pearson Education, with new print and online programmes performing very strongly both in the United States and in international markets, increased underlying sales by 10% and reduced seasonal first half losses by 27%. The Learning Network, incorporating the recently acquired Family Education Network and building on its strategic alliance with America Online, is on track to launch in September.
- The Financial Times group, with its business titles generating strong advertising and circulation growth, increased underlying sales by 24% and operating profits (pre Internet enterprises) by 29%. Accelerated investment in the FT group's Internet enterprises is driving strong traffic and revenue growth, putting these enterprises on track to break even in 2002, some two years ahead of expectations.
- The Penguin Group, publishing a record number of new best-selling titles and moving its authors on to the Internet, increased underlying sales by 9% and operating profits by 16%, before taking account of the acquisition of Dorling Kindersley, completed in mid May. The group is integrating Dorling Kindersley rapidly, aiming for significant margin improvements and creating new publishing opportunities across all media.
- Pearson Television's merger with CLT-Ufa was completed last week, creating Europe's largest integrated broadcasting and content company. The company, in which Pearson will have a 22% stake, was last week listed on the London Stock Exchange and is currently valued at some £16 billion.
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Marjorie Scardino, chief executive
John Makinson, finance director
John Fallon, communications director
Marjorie Scardino, chief executive of Pearson, said:
"These results demonstrate both consistency and growth. We are achieving strong organic growth in revenues and profits across all our businesses. At the same time we're accelerating investment in new businesses so that they can more quickly become an integral, and profitable, part of a stronger Pearson.
"Today's proposed acquisition of National Computer Services marks another big strategic step for us. The combination of NCS and Pearson Education, enriched by the assets and capabilities of our other media businesses, puts us at the heart of the knowledge and service economy that is changing our world."
In the first six months of 2000, total sales increased by 18% to £1,545 million. Underlying sales growth (excluding portfolio changes and exchange rate movements) was 12%. Operating profits from continuing operations, before goodwill, exceptional items and the net costs of developing Pearson's Internet enterprises, increased by 32% to £148 million. On an underlying basis, operating profits increased by 33%. Adjusted earnings per share (pre Internet enterprises) increased by 41% to 10.0p. Pre tax profits of £123m (compared to a loss of £20m in the first six months of 1999) reflect the completion of the sale, early in the year, of Pearson's stakes in the Lazards investment houses. In addition to making online developments an integral part of all our businesses, we are stepping up investment in developing Internet enterprises, which capitalise on the power of our brands and content and generate new and distinct revenue streams. In the first half of the year, the net cost of developing these enterprises was £84m.
|£m|| 2000 |
|% change||1999 |
|Higher Education & Professional||215||178||21%||666|
Our US School business has made a very strong start to the year, with underlying sales increasing by 15%. Our new reading programmes, in English and Spanish, gained substantial market share in both state adoptions and open territories. New science and literature programmes are also performing well, and our best selling math programmes continue to win new business and generate strong backlist sales. Both Computer Curriculum Corporation and Pearson Electronic Education, capitalising on growing investment in educational and online software, are scoring major sales across the United States.
Our Higher Education & Professional business is on track for another good year, posting first half-underlying revenue growth of some 6%. Buoyed by a successful spring sales campaign, our US college publishing operation is extending its market leadership with the launch of its own online course management system. The system supports some 250 online courses and combines easy to use technology with Pearson Education content. Our professional and technology publishing business is also performing well, with its titles consistently leading the Information Technology (IT) best-seller lists and helping to drive traffic to Informit, our Information Technology portal.
With the AWL and Simon & Schuster publishing programmes and distribution and marketing networks now fully integrated, our International business is in very good shape to capitalise on stronger growth in Latin American and Asian markets. In Latin America, our expanded programme of higher education and professional titles is performing particularly well while, in Asia, growth is being driven by the strength of our school and IT publishing. In the rapidly growing business publishing market, we are seeing the first benefits of an alliance between Pearson Education and the Financial Times group. Worldwide, our market leading English Language Teaching enterprise continues to expand rapidly. At constant exchange rates, the International business increased first half revenues by some 13%.
The integration of the Simon & Schuster and Addison Wesley Longman businesses is substantially completed, and will deliver, as expected, some $130m in annual cost savings by the end of the year.
FT Knowledge, our business and management education division, made losses of some £5m as it invested, in partnerships with a number of the world's leading business schools, in bringing to market interactive, online learning programmes aimed at the international business community. The acquisition of The Forum Corporation, one of America's top corporate training companies, announced earlier this month, enables it to create an innovative corporate training and e-Learning company.
Development of the Learning Network, which aims to build on Pearson Education's strengths in curricular content to create the Internet's premier education source, has progressed rapidly and the network will be launched in September. We have formed a strategic alliance with America Online, the world's leading interactive services company, which positions the network as a premier supplier of educational content and online learning tools. We have recently acquired Family Education Network, the leading online K-12 network for parents, teachers and students, which will form an integral part of the Learning Network. Its development has also been accelerated by the announcement of a number of additional strategic investments and alliances in online education businesses including Classroom Connect, Score! Learning, Edgate.com and Blackboard.
The Financial Times Group
|% change||1999 |
|FT Interactive Data||26||15||73%||31|
|FT Businesses sold||-||(1)||-||(2)|
|FT Joint Ventures||(9)||-||-||-|
Our business newspapers continue to deliver very strong circulation and advertising growth. In June, average daily worldwide sales of the Financial Times newspaper increased to 462,000, an increase of 17%. For the first six months of the year, advertising revenues increased by 40%. In France, Les Echos increased average daily circulation by 6% to 157,000, while, in Spain, average daily sales of Expansion grew 7% to 67,100. At Les Echos, advertising revenues grew by 20% and they increased by 30% at Expansion. Average daily sales of Financial Times Deutschland, the German language business newspaper launched earlier this year in a joint venture with Gruner + Jahr, are running at 50,000, well ahead of our first year target. It is also beating its initial advertising target.
Our integrated network of finance and business websites and our online services are also generating strong traffic and revenue growth. Our business portals, which build on our newspapers and are targeted at international business executives, are developing rapidly. FT.com, benefiting from its launch as a business portal and a major marketing push, now attracts some 1.2 million unique monthly users and around 30 million monthly page views, a 45% increase since January this year. Pages consumed per user per day - a key measure of a site's "stickiness" - have increased from 5 to 8 since its transformation into a business portal, reflecting the rich content of the site. Lesechos.fr and expansiondirecto.com are also sustaining strong traffic growth and building their market leading positions in France and Spain, while FT.de has quickly established itself as one of Germany's leading business and financial websites. Building on the strength of the Financial Times brand, we have launched a number of new online services targeted at individual investors and savers. FTYourMoney.com and mesfinances.fr are quickly establishing themselves as leading personal finance websites in the UK and French markets. Financial Times MarketWatch.com, our joint venture with MarketWatch.com, operator of America's leading financial website and one of the 50 most visited sites in the world, launched last month. The site, which aims to become the leading online source of real-time news and interactive data for European private investors, has made a strong start in attracting both visitors and revenues.
Pearson now owns 60% of FT Interactive Data, following its merger, completed earlier this year, with Data Broadcasting Corporation. The integration of the two businesses is going well and delivering significant revenue and cost synergies.
Recoletos, our Spanish media group, delivered strong growth across both its print titles and online services, increasing advertising revenues by some 30%. In June, average daily sales of Marca, Spain's leading sports newspaper, increased by 8% with other Recoletos titles - Telva and Actualidad Economica - achieving similar sales growth. Recoletos continues to develop its position as Spain's leading online media group, with its sites generating total page views of some 65m in June 2000, up from 9m in June last year. This growth means that, with El Mundo, the leading Spanish daily newspaper in which it owns a 30% stake, Recoletos is now the second most visited portal in Spain.
First half losses of £9m in Financial Times Joint Ventures reflect our share of the start up costs of the Financial Times Deutschland and Financial Times MarketWatch. In Associates a strong underlying performance from BDFM our South African business publishing operation, and The Economist Group were offset by one off restructuring charges at The Economist Group.
The Penguin Group
|£m|| 2000 |
|% change||1999 |
Investment by The Penguin group in building a stronger front-list of new and established authors is paying dividends. In the year to date, we have notched up 58 titles on the New York Times best-sellers list (up from 34 in 1999) and 31 titles on the Sunday Times best-sellers list (up from 22 in 1999.) Our best-seller performance in the second half of 2000 is projected to be strong, as we publish new titles from some of our brand name authors. We are also benefiting from further steps to improve our supply chain and business processes. In the US, warehousing consolidation, a new web enabled order shipping and tracking system and continuing growth in online sales are all helping to improve the economics of our publishing business. We are also stepping up the digitisation of our titles, expanding our E-Book publishing programme and using the Internet to promote our authors and build more direct relationships with our customers. We continue to build and broaden the visibility of the Penguin brand. We launched the next phase of our UK brand campaign, revitalised our Viking imprint in the US and acquired world-wide author rights. On May 10, we completed the acquisition of Dorling Kindersley, the leading illustrated reference publisher. The Dorling Kindersley integration is on track, delivering scope for significant margin improvements and creating new publishing opportunities across all media. Its attractive, wholly owned digital content, also creates new opportunities across all our companies.
|£m|| 2000 |
|% change||1999 |
Pearson Television increased sales by 3%, with its stable of serial dramas and game shows continuing to deliver good peak time audiences, particularly across Europe. Operating profits dipped slightly as it increased investment in developing the new shows and formats that will refresh its television production business. For the first time, we can report a profit from our stake in Channel 5, which continues to grow audience and advertising share ahead of budget.
Last week, we completed the merger of Pearson Television and CLT-Ufa to create Europe's leading pan European integrated broadcast and content company. The RTL Group, in which Pearson will have a 22% stake, is now listed on the London Stock Exchange and is valued at some £16 billion.
Our business operations have made a strong start to the second half of the year and are trading in line with our expectations. We continue to step up our investment in developing the Internet enterprises that will secure Pearson's longer term growth.