On track for strong earnings rebound in 2002
NEW YORK (July 29)— Pearson, (LSE: PSON; NYSE: PSO) the international media company, reported that operating profit from continuing operations (before goodwill and exceptional items) increased by 27% to £76 million ($116 million) in the first half of 2002, compared to £60 million ($91 million) in the first half of 2001. Pre-tax profit (operations before goodwill, integration costs and non-operating items) increased to £26 million ($40 million) up from £5 million ($8 million) in the same period last year. Adjusted earnings per share increased to 0.5p from a loss of 1.5p per share in the same period last year, with the benefit of lower internet losses and reduced interest charges, which more than offset a £31 million ($47 million) (55%) fall in the earnings contribution from advertising-related newspaper operations. Dividend per share was 9.1p up 5% from 8.7p in the same period last year.
A loss after goodwill amortization for the half-year of £207 million ($315 million) (26.0p per share) reflects the fact that Pearson makes nearly all its profits in the second half, but goodwill is amortized evenly through the year. A loss of £118 million ($179 million) (14.8p per share) in the same period last year reflected an exceptional tax gain of £121 million ($184 million) which was not repeated in 2002.
Sales in the six months to June 30, 2002 were £1,813 million ($2,756 million), 3% lower than in the first half of 2001, due to lower advertising revenues at the Financial Times Group.
The company is on track for strong earnings rebound in 2002:
- Competitive performances in all businesses:
- -Education and consumer publishing set for good revenue and earnings growth
-Cost management across business newspapers to mitigate advertising downturn
-Sharing assets, process and culture to drive performance.
- Internet losses and interest charges down sharply on last year.
- Good cash generation and reduced working capital.
Marjorie Scardino, Pearson’s chief executive, said:
“We’ve improved our earnings and cash performance despite the worst downturn in corporate advertising for 30 years. The strength of our education and consumer publishing businesses should help us to sustain this momentum both through the second half, when we make most of our profits, and in 2003.”
Pearson makes most of its sales and almost all of its profits in the second half of the year. We are on course to deliver a significant recovery in adjusted earnings per share in 2002, in line with our previous expectations*.
We expect our education businesses to increase underlying revenues in the 3–5% range with margins broadly in line with those achieved in 2001. The Penguin Group looks set to deliver double-digit growth in profits. If advertising demand continues at the level we saw in the first half of the year, we expect the FT Group to record operating profits for the full year some 10-15% lower than in 2001. This is before losses from internet enterprises, which are expected to be less than £60 million ($91 million) for the full year for Pearson as a whole (compared to £137 million ($208 million) last year).
For the full year, we expect free cash flow to benefit from actions taken to improve use of working capital and lower restructuring costs. We also expect a modest reduction in our interest charge, compared to the first half of this year**.
* A 5 cent change in the average exchange rate for the full year (which for the six months to June 30 was £1:$1.45) will have an impact at approximately 1p on adjusted earnings per share.
** This excludes a one-time cost this year of £37m relating to actions taken this year to maintain the proportion of debt we pay at fixed and floating rates.
Pearson’s interim results presentation for investors and analysts will be webcast live today from 0930 GMT and available for replay from 12 noon BST via www.pearson.com.
We will also be holding a conference call for US investors at 10:00am EST/1500 (BST). The toll free dial-in number is + 1 (800) 513 7968, the international dial-in number is +44 20 8240 8246 and the password is Pearson. To listen to the audiocast, please register at www.pearson.com.
Video interviews with Pearson’s senior management are also available at www.pearson.com.
The press release including operating businesses and financial statements is available on www.pearson.com.
Notes: throughout this statement:
1. 2001 numbers have been restated for FRS19, the new accounting standard for deferred tax.
2. ‘underlying growth’ excludes the impact of acquisitions, disposals and currency movements, but all are detailed in this announcement.
3. Sterling figures have been translated into dollars at a rate of 1:$1.52 for reference purposes only.
John Fallon / Luke Swanson Pearson + 44 (0) 20 7010 2310 Steve Lipin / Wendel Carson Brunswick +212 333 3810