UPDATE: Publisher Pearson Expects Another Profitable Year

Publisher Pearson PLC (PSON.LN) Monday forecast another profitable year as it posted market-beating earnings and sales for 2009 and increased its dividend by 5%, buoyed by its extensive education operations in the U.S., digital learning and the strength of the dollar against sterling.

With market share up across all its businesses, Pearson said it expects "to produce another year of underlying profit growth, helped by the overall resilience of our company and good growth prospects for our businesses in digital, services and emerging markets."

Chief Financial Officer Robin Freestone declined to give specific guidance numbers for 2010, noting the market is "still pretty fragile out there."

"I'm not the sure that the world is completely right yet, and I'm not sure we'll get much help from those markets this year," he told reporters on a conference call.

Pearson publishes the Financial Times newspaper and Penguin books, but is dominated by its huge education division with imprints including FT Prentice Hall, Longman and York Notes.

Adjusted earnings per share, which excludes intangibles such as goodwill, rose 13% to 65.4 pence for the year ended Dec. 31--ahead of the group's revised guidance in January of 63.5 pence. That compares with 57.7 pence a piece a year earlier.

Net profit jumped 46% to GBP425 million in 2009 from GBP292 million a year ago on the back of a 17% increase in sales to GBP5.62 billion from GBP4.81 billion. Underlying sales rose 2%.

The 2009 results and positive outlook comments were well received by the market, with Numis analyst Paul Richards describing the numbers as good and "slightly ahead of expectations". Richards said he is "very pleased" by the group's guidance for 2010.

"Clearly in 2009, there was a mixture of good markets and tough markets for Pearson, the tougher markets likes schools, FT advertising and Penguin showing signs of easing so overall I think you can expect the group to perform well in 2010," he added. Numis has an add rating on Pearson and 1030 pence target price.

As a result of the ongoing strong trading performance, Royal Bank of Scotland analyst Paul Gooden expects "modest earnings upgrades."

At 0820 GMT, Pearson shares were up 15 pence, or 1.6%, at 927 pence, valuing the group at GBP7.52 billion. The stock has risen 42% over the past 12 months, underpinned by the strong performance of its education operations.

In education, which accounts for 60% of total earnings and sales, Pearson expects to gain further share in the U.S. School market in 2010, "which will benefit from a stronger adoption opportunity" of around $850 million to $900 million, and new federal funds, "broadly offset by continued pressure on education funding at the state level.

In higher education and international education, Pearson expects "to produce further underlying growth and share gains" this year.

Chief Executive Marjorie Scardino was tightlipped about the strategic review being carried out by New York-listed financial market data provider Interactive Data Corp. (IDC) amid speculation it may be sold. Pearson owns about 61% of Interactive Data.

Pearson declared a final dividend of 23.3 pence a share, taking the total for 2009 to 35.5 pence. That compares with 33.8 pence in 2008.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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