UPDATE: Pearson 1Q Update Strong, Flags Annual Profit Growth

Publisher Pearson PLC (PSON.LN) Friday said first quarter revenue rose 7% to GBP1.08 billion, underpinned by its extensive education operations, and reiterated that it expects another year of underlying profit growth.

The U.K.-based company also said its U.S. school curriculum business has returned to revenue growth in the traditionally quiet first quarter, despite state budget pressures, and that its Financial Times newspaper has seen a return to advertising revenue growth, which was well received by U.K. media analysts.

Chief Executive Marjorie Scardino said the first quarter "never tells us a great deal about the full year but our direction of travel is encouraging."

"Our leadership in global education and the rapid growth of our digital and services businesses across Pearson continue to propel strong trading," she added.

Despite remaining cautious about the economic outlook, the group is "confident we can build on our consistent record of profit growth this year," Scardino said ahead of the group's annual shareholder meeting in London later Friday.

At constant currencies, revenue was up 12% in the quarter ended March 31. The group didn't release first quarter profit numbers or forecasts for the full year.

Pearson publishes the Financial Times and Penguin books but is dominated by its huge education division with imprints including FT Prentice Hall, Longman and York Notes. Education accounts for around 60% of its total earnings and sales.

The group said its U.S. School curriculum business returned to revenue growth in the first quarter, helped by new textbook programs.

At FT Publishing, strong demand for print and online subscriptions to the Financial Times, an increase in new sales at Mergermarket and a return to growth in advertising revenues all contributed to a good first quarter. "We are encouraged by a more positive environment for corporate and financial advertising, but bookings remain volatile and visibility remains poor," Pearson said.

The trading update was well received by analysts, with UBS describing it as "another strong update." UBS has a buy rating on the stock and 1100 pence price target.

"The solid start to the year and return to growth amongst more cyclical parts of the business are encouraging," Citigroup said in a research note.

At 0743 GMT, Pearson shares were down 2 pence, or 0.2%, at 1048 pence in a flat London market. The stock has risen 51% over the past 12 months on the back of solid trading and market hopes it will get a good price for the sale of Interactive Data Corp. (IDC).

But Pearson was tightlipped on the sale process of IDC, in which it holds a 61% stake. It merely reiterated that IDC's board is "currently reviewing strategic alternatives for the company".

Pearson also said it expects "another good competitive performance" from Penguin, with a good publishing schedule in the second half of 2010. Demand for eBooks remains very strong with Penguin developing new publishing models for digital devices, the company said.

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

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