Pearson Plc Interim Results LONDON, July 26 /PRNewswire-FirstCall/
-- PEARSON PLC INTERIM RESULTS (unaudited) Six months ended 30 June
2004 (in pounds sterling except noted) Half year Half year Half
year Half year 2004 2004 2003 2003 Sales 1,594m $2,885m 1,665m
$3,014m Business performance Adjusted operating profit* 39m $71m
38m $69m Adjusted profit/ (loss) before tax* 2m $4m (1)m $(2)m
Adjusted earnings per share* (1.8)p $(.033) (2.3)p $(.042)
Operating cash flow (195)m $(353)m (338)m $(612)m Free cash flow
(262)m $(474)m (381)m $(670)m Statutory results Operating (loss)/
profit (77)m $(139)m (110)m $(199)m (Loss)/ profit before tax
(112)m $(203)m (138)m $(250)m (Loss)/ earnings per share (15.5)p
$(.0281) (20.1)p $(.0364) Dividend per share 9.7p $.0176 9.4p $.017
Net borrowings 1,734m $3,139m 1,897m $3,434m Change - Change - Full
year Full year underlying headline 2003 2003 Sales 1% (4)% 4,048m
$7,327m Business performance Adjusted operating profit* 47% 3% 490m
$887m Adjusted profit/ (loss) before tax* -- 410m $742m Adjusted
earnings per share* 22% 32.0p $.0579 Operating cash flow 42% 320m
$579m Free cash flow Statutory results 31% 192m $348m Operating
(loss)/ profit 30% 226m $409m (Loss)/ profit before tax (Loss)/
earnings per share 19% 152m $275m 23% 6.9p $.0125 Dividend per
share 3% 24.2p $.0438 Net borrowings 9% 1,361m $2,463m *Continuing
operations before goodwill and non-operating items. Throughout this
statement, we refer to business performance measures and growth
rates on an underlying basis unless otherwise stated. Underlying
growth rates exclude the impact of currency movements and portfolio
changes. In the first half of 2004, portfolio changes reduced
profits by 6m pounds($11m) and increased revenues by 39m pounds
($71m). This was largely due to the acquisition of London
Qualifications. Strong first-half performance; on track for the
full year -- Good progress on adjusted operating profit (up 47%)
and operating cash flow (improved 42% as reported). -- Decline in
the US dollar reduces headline revenues by 129m pounds ($233m) and
adjusted operating profit by 8m pounds ($14m). -- Cost actions
paying off: FT reduces first-half losses by 9m pounds($16m);
profits increasing at all business newspapers; school digital
learning businesses return to first-half profit. -- Gaining share
and getting stronger: School business takes number one position in
new maths adoptions and extends lead in personalised learning;
Higher Education, Penguin US and IDC growing ahead of their
markets; business newspapers gaining audience share; $400m worth of
new long-term contracts in testing and government services.
Improving market conditions support confidence in 2004 and beyond
-- Business advertising revenue growth turns positive for the first
time in three years. -- Growing base of long-term contracts, helped
by growth trends in school testing, professional certification and
government outsourcing. -- Recovery in state budgets and political
commitment to education support healthy outlook for US school and
higher education businesses. Marjorie Scardino, chief executive,
said: "These results for the first half are a good sign of our
financial and competitive success, though as usual they represent a
small part of our annual total. They make us confident that we will
meet our goals, both this year and beyond, as our market conditions
improve." Outlook Pearson makes most of its sales and almost all of
its profits in the second half of the year, due to the seasonal
phasing of our book publishing businesses. At this stage we
continue to expect underlying progress in earnings, cash and
returns. The outlook for our major businesses is: At Pearson
Education, we expect revenues at our School business to be broadly
level with 2003, as growth in our testing and supplementary
businesses offsets the particularly weak 2004 school adoption
opportunity. We expect our US Higher Education business to grow in
the 4-6% range, as its leading print and online programmes enable
it to grow ahead of its market once again. Our Professional
operations are on track to increase revenues and profits, despite
our investment in new professional testing centres. We continue to
expect that we will receive the full $151m payment for work
completed in 2002 on behalf of the US Transportation and Security
Administration. We expect significant revenue and profit growth
from Pearson Education in 2005, helped by a rebound in the School
adoption cycle, improving state budgets, steady growth in Higher
Education and the benefits of our 2003 Professional contract wins.
The FT Group is on track to make good profit progress this year.
Although advertising trends at our business newspapers remain
erratic from month to month and between categories, advertising
revenue growth has turned positive for the first half as a whole
and forward bookings continue to run a little ahead of last year.
With costs now significantly lower than at any point in the past
three years, all of our business newspapers are in good shape to
benefit from further improvement in the corporate advertising
environment. We expect losses at the Financial Times to be some 20m
pounds ($36m) lower than last year, even without any growth in
full-year advertising revenues. The FT Group will also benefit from
another strong year from IDC. The Penguin Group's publishing
schedule is once again heavily weighted to the second half of the
year. Penguin faces tough comparisons after a record 2003 and
reported results will again be affected by the weak US dollar. We
expect a good second half as we have a very strong publishing
schedule in the US and the UK, and we are now well on the way to
restoring fulfilment standards following the move to our new UK
warehouse. Exchange rates and interest. A five cent change in the
average exchange rate for the full year (which in 2003 was 1
pound:$1.63) will have an impact of approximately 1p ($.018) on
adjusted earnings per share. We expect our interest charge in the
second half to be marginally higher than the first-half level of
37m pounds ($67m), as better cash flow is offset by the expected
rise in interest rates. Trading updates. From this year, Pearson
will issue an additional trading statement to the market around the
end of October. This will provide investors and analysts with an
update on trading in the third quarter, which is an important
selling period for our book publishing businesses. Our pre-close
trading update will now be published early in January, after our
busy end of year trading period. For more information: Luke Swanson
/ Charlotte Elston + 44 (0) 20 7010 2310 Pearson's interim results
presentation for investors and analysts will be webcast live today
from 0900 (BST) and available for replay from 12 noon (BST) via
http://www.pearson.com/. We are holding a conference call for US
investors at 1500 (BST) / 1000 (EDT). To participate in the
conference call or to listen to the audiocast, please register at
http://www.pearson.com/. A video interview with Rona Fairhead is
also available at http://www.pearson.com/. High resolution
photographs are available for the media at
http://www.newscast.co.uk/. For the complete release, including all
financial detail, please access http://www.pearson.com/ Notes.
Throughout this statement (unless otherwise stated): 1. Growth
rates are stated on an underlying basis, excluding the impact of
currency movements and portfolio changes. Pearson generates
approximately 70% of its revenues in the US. The average exchange
rate for the first half of 2004 was 1 pound: $1.82 (1 pound: $1.61
in the first half of 2003). The full year exchange rate in 2003 was
1 pound:$1.63; 2. Adjusted figures are presented as additional
measures of business performance. They are stated before goodwill
and non-operating items. Goodwill is amortised over no more than 20
years. 3. The 'business performance' measures, which Pearson uses
alongside other measures to track performance, are included to
provide additional detail on business performance. They are
non-GAAP measures for both US and UK reporting. Reconciliations of
adjusted operating profit, adjusted profit/ (loss) before tax,
adjusted earnings per share and operating cash flow to the
equivalent statutory heading under UK GAAP are included in notes 2,
5, 6 and 10 respectively. 4. All US dollar equivalents have been
converted at a rate of $1.81: 1 pound for illustrative purposes
only. Financial review Due to the seasonal phasing of our book
publishing businesses, we generate most of our sales and profits in
the second half of the year. We make approximately two-thirds of
our revenues in the US and our reported results continue to be
affected by the weakness of the US dollar. The weakening of the
dollar to 1 pound: $1.82 in the first half of 2004 (from 1 pound:
$1.61 in the first half of 2003) reduced our headline sales by 129m
pound ($233m) and our adjusted operating profit by 8m pound ($14m).
Sales in the first half were 1,594m pound ($2,885m), 1% ahead of
the first half of 2003 in underlying terms. Growth in Higher
Education and the FT Group was largely offset by lower sales in US
School publishing as a result of the expected weak adoption cycle.
Adjusted operating profit was up 47% to 39m pound ($71m), helped by
cost actions -- particularly at the FT Group, where profits were up
36% on 5% revenue growth. Adjusted loss per share improved from
(2.3)p to (1.8)p, or ($.042) to ($.033). Operating cash flow
improved by 143m pounds($259m) to (195)m pounds ($(353)m) and free
cash flow by 119m pounds($215m) to (262)m pounds($(474)m). Our cash
flow benefited from Penguin's very strong publishing schedule in
the fourth quarter of 2003, which pushed collections into the early
part of this year, cost reductions at the FT Group, and an improved
cash performance from Pearson Education. Excluding the impact of
TSA, the average working capital to sales ratio improved from 31.0%
to 30.7% even as we increased investment in our businesses. On a
statutory basis, our loss before tax improved 19% to (112)m pounds
($(203)m), helped by a lower (non-cash) goodwill amortisation
charge of 116m pounds ($210m) (148m pounds($268m) in 2003). We make
a statutory loss in the first half because we make most of our
operating profits in the second half but spread our goodwill
amortisation evenly through the year. Pearson's net borrowings,
which peak at the half-year stage, were 9% lower than last year at
1,734m pounds ($3,139m). During the first half, we successfully
refinanced Pearson's debt facilities maturing in 2004 and 2005. In
May we issued $750m of 5-year and 10-year bonds into the US market,
refinancing bonds due in the second half of 2004. In July we signed
a $1,350m revolving credit facility arrangement with a group of 18
banks to support our working capital borrowings and to refinance a
similar agreement due in July 2005. These refinancings have
extended the average maturity of Pearson's debt by about two years.
The board has declared a 3% increase in the interim dividend to
9.7p ($.0176), payable on 24 September 2004 to shareholders who are
on the register at the close of business on 27 August 2004. Pearson
Education pounds millions Half year Half year Change - Change -
Full year 2004 2003 underlying headline 2003 Sales School 466 487
(2)% (4)% 1,176 Higher Education 187 196 6% (5)% 772 Professional
220 244 0% (10)% 503 Total 873 927 0% (6)% 2,451 Adjusted operating
profit School 8 12 29% (33)% 127 Higher Education (41) (43) (9)% 5%
148 Professional 7 5 100% 40% 38 Total (26) (26) 6% 0% 313 Pearson
Education generates most of its sales in the second half of the
year and is typically loss-making in the first half. Sales at our
School business were 2% lower. 2004 is as expected a weak year for
the US School publishing industry, driven by the low new adoption
opportunity. (In the US, 20 'adoption' states buy textbooks and
related programmes on a planned contract schedule or 'adoption
cycle'. The level of spending varies from year to year with this
schedule, depending on the number of adoptions in the largest
states and subjects. In 'open territory' states, school districts
or individual schools buy textbooks according to their own
individual schedules rather than on a statewide basis.) However, we
have had another strong year in new adoption sales, taking
approximately 27% of the total new adoption market (after competing
for some 90% of the total). We have taken the leading share in
maths, science and social studies adoptions this year, benefiting
from the breadth of our business across subject disciplines and
across elementary, middle and high school grades. We have also
begun the year strongly in non-adoption states or 'open
territories', which mostly buy textbooks in the second half and
will constitute a larger proportion of the overall market this
year, given the weak adoption calendar. We are performing well in
all major subject areas and particularly in maths and social
studies as we customise major programmes for individual states. Our
digital learning and supplementary publishing businesses are well
placed to benefit from the recovery in US state budgets which is
now under way and the flow of new federal education funds into the
market under the No Child Left Behind legislation. Though both
businesses make most of their sales in the second half, profits
improved significantly as a result of measures taken last year to
reduce costs and focus on a smaller number of large-scale, more
profitable programmes. Revenues were down a little at our school
testing business as a result of the phasing of its major contracts
this year. However, we continued to win contracts to help states
including Florida and New Jersey meet the No Child Left Behind
accountability requirements from 2005. Our school businesses are
also performing well outside the US. We have begun to introduce our
testing capabilities in the UK, successfully marking more than one
million GCSE and A-level scripts on screen this summer. In
addition, the UK's National Assessment Agency has recently awarded
Pearson a three-year contract for the National Curriculum or Key
Stage Tests. KnowledgeBox, our digital learning programme launched
last year, which contains content, assessment and lesson plans, is
now installed in more than 500 primary schools. We also launched
English Adventure, our new English language teaching programme, in
the first half. The series, for ages 4 - 12, uses Disney characters
to motivate young learners, and is our first worldwide ELT
programme for schools. It is exceeding our expectations in Spain,
its first market, where over 100,000 children will be learning with
it from September. Seven further editions for other markets are due
to be launched next year. Our Higher Education business makes
approximately three-quarters of its revenues in the second half of
the year, with major selling seasons in July/ August and December,
ahead of the two US college semesters. The business reports losses
in the first half as it invests in publishing, sales and marketing
to deliver full-year growth. Worldwide, sales were up 6%. In the
US, sales were up 4%. We have had a successful first-half sales
campaign, benefiting from new publishing in targeted segments such
as health and languages, success in high enrolment basic English
and maths skills courses, the rapid roll-out of our online learning
services to new subject areas and our fast-growing custom
publishing business. The US higher education market is changing
rapidly, and we are helping faculty and students to adapt by
offering a broad range of choice and value. Our Pearson Choices
programme makes our leading educational content available in a wide
range of formats: conventional textbooks, low-cost print
alternatives, online learning platforms and custom programmes. This
summer we are using our Safari joint venture to launch the latest
addition to that range: an online service (http://www.safarix.com/)
which will provide more than 300 web-based textbooks at 50% of the
cost of their print alternatives. In our Professional business,
profits were ahead on flat revenues. Our technology publishing
businesses around the world continue to face very tough market
conditions, with employment levels and software releases in the IT
industry still low. Although technology publishing revenues were 3%
lower in the first half, our business is gaining share and expects
to benefit from a pick-up in new software and games releases from
the second half of 2004. Our Government Solutions business
increased revenues by 10%, with good growth from existing
contracts, and won more than $100m in new contracted business.
Revenues at our Professional Testing business were 14% ahead, with
particularly strong growth from our contract with the National
Council of State Boards of Nursing. We are investing this year to
expand our international network of testing centres to support
newly won contracts for customers such as the Graduate Management
Admissions Council and the UK's Driving Standards Agency. Financial
Times Group pounds millions Half year Half year Change - Change -
Full year 2004 2003 underlying headline 2003 Sales Financial Times
104 102 3% 2% 203 Other FT publishing 56 54 10% 4% 112 Recoletos 90
82 12% 10% 169 IDC 130 132 2% (2)% 273 Total 380 370 5% 3% 757
Adjusted operating profit Financial Times (6) (15) 60% 60% (32)
Other FT publishing 6 3 58% 100% 6 Recoletos 15 14 7% 7% 28 IDC 37
41 2% (10)% 81 Associates and joint ventures 3 0 -- -- 3 Total 55
43 36% 28% 86 The Financial Times Group grew revenues by 5% and
profits by 36% as our business newspapers benefited from cost
savings and, for the first time in three years, improvements in
advertising revenues. Losses at the Financial Times improved by 9m
pounds as a result of cost measures taken last year including the
integration of our UK and European commercial operations.
Advertising revenues were 3% higher for the first half of the year,
having been 4% lower in the first two months and flat at the end of
April. Advertising trends remain erratic from week to week and
across categories. We have seen rapid growth in recruitment, luxury
goods and business travel advertising, although the technology and
business-to-business sectors remain weak. Newspaper circulation was
some 5% lower at 427,000, but the FT is performing well on the key
business readership surveys and FT.com's paying subscribers
increased from 57,000 in June 2003 to 76,000 in June 2004. Profits
at Les Echos were significantly ahead of last year as costs were
lower and advertising revenues grew 7%, benefiting from the French
government privatisation programme and increased M&A activity
including the Sanofi/ Aventis deal. Daily paid circulation was
slightly ahead at 118,000 as the relaunch of Les Echos in its new
Berliner format helped it to grow as the overall French newspaper
market declined. FT Business has seen a broad-based return to
advertising growth since the start of the year, and is performing
well. Recoletos (Bolsa Madrid: REC) achieved sales growth of 12%
and profit growth of 7%, recovering strongly after a weak March
following the terrorist attacks in Madrid and the Spanish election.
Advertising revenues increased 14% overall and 5% in Recoletos'
business and finance division. Circulation at sports newspaper
Marca declined by 5% to 360,000 and was up 3% to 48,000 at
Expansion, Spain's leading business newspaper. Recoletos has
announced plans to invest $16.5m in the second half - with a profit
impact of some $13.5m - in the launch of Rumbo, a network of
Spanish-language newspapers targeted at the fast-growing Hispanic
community in Texas and other southern US states. Interactive Data
Corporation (NYSE:IDC) increased revenues by 2% and adjusted
operating profit by 2%. Renewal rates in IDC's institutional data
business, which accounts for two-thirds of revenues, remain very
high at or above 95%, and IDC has successfully launched several new
products. The integration of Comstock is going well and IDC is in
the process of consolidating its data centres in the US. After
several difficult years for the market data industry, IDC is now
seeing a gradual improvement in market conditions. The FT's
associates and joint ventures generated a profit of 3m pounds,
against breakeven in the first half of 2003. FT Deutschland, our
joint venture with Gruner + Jahr, increased circulation a further
5% to 95,500 and increased advertising revenues in double digits
despite the tough market environment. The Economist continued its
excellent circulation performance: average worldwide weekly
circulation grew to 943,490, a 4% increase for the year, with the
strongest growth in North America. The Penguin Group pounds
millions Half year Half year Change - Change - Full year 2004 2003
underlying headline 2003 Sales 341 368 0% (7)% 840 Adjusted
operating profit 10 21 (15)% (52)% 91 At Penguin, sales were level
with last year, with our schedule of major frontlist titles once
again heavily weighted to the second half. Adjusted operating
profit declined by 4m pounds, as a result of our investment in new
channel initiatives, the bankruptcy of distributor Thomas Cork and
disruption to UK distribution. Reported profit shows a further 7m
pounds impact from the weaker dollar. In the US, Penguin's largest
market, sales were ahead, helped by strong performances from Lynne
Truss' Eats, Shoots and Leaves, Tom Clancy's Battle Ready with Gen.
Tony Zinni (Ret.), Nora Roberts' Key trilogy, Chesapeake Blue and
Birthright and Karen Joy Fowler's The Jane Austen Book Club. The
Penguin translation of Leo Tolstoy's Anna Karenina, which sells an
average of 20,000 copies per year, was selected in May for Oprah
Winfrey's book club and now has almost one million copies in print.
Penguin US has also benefited from contributions from its new
imprints The Penguin Press, Gotham and Portfolio. All three new
imprints have published New York Times bestselling titles,
including Ron Chernow's Alexander Hamilton and Steve Coll's Ghost
Wars. In the first half Penguin had a total of 75 titles on the New
York Times list. In the UK, Penguin had a strong first half
bestseller performance, with a total of 34 books in the Nielsen
Bookscan top 10. Kevin Lewis' memoir The Kid spent nine weeks at
number one, and Marian Keyes' The Other Side of the Story also hit
number one. There were strong debuts from a number of new fiction
authors, with Jillian Hoffman's Retribution, Plum Sykes' Bergdorf
Blondes and PJ Tracy's Want to Play? all making it into the
bestseller charts. We are continuing to integrate back offices,
warehousing and distribution for Penguin and Pearson Education in
several markets around the world. We have successfully combined our
businesses and their supply chains in Australia, Canada and India
and are on track to deliver some 20m pounds of annual cost savings
from our integration initiatives from 2005, which will be shared
with Pearson Education. In the UK, the move to a new shared
distribution centre for Penguin and Pearson Education disrupted
supply of Penguin titles to bookstores in the second quarter. We
are well on the way to restoring fulfilment standards to normal
levels, ahead of Penguin's major selling season in the second half.
In the second half, Penguin will benefit from another strong
publishing schedule. In US fiction we have new titles from many of
our most reliable repeat best-selling writers, including Patricia
Cornwell, Nora Roberts, Sue Grafton, Clive Cussler, GP Taylor and
Madonna. In the UK, we have new titles from Jamie Oliver, Jeremy
Clarkson and Sue Townsend, as well as a number of TV tie-ins: You
are What you Eat, How to Buy a House and Too Posh to Wash. Dorling
Kindersley is also set for a strong second half, with Human and
Plant in the same series as existing bestsellers Earth and Animal,
and a follow up to last year's America 24/7 with The America 24/7
State Book series, with a book for each of the 50 states. Except
for the historical information contained herein, the matters
discussed in this press release include forward-looking statements
that involve risk and uncertainties that could cause actual results
to differ materially from those predicted by such forward-looking
statements. These risks and uncertainties include international,
national and local conditions, as well as competition. They also
include other risks detailed from time to time in the company's
publicly-filed documents, including the company's Annual Report on
form 20-F. The company undertakes no obligation to update publicly
any forward looking statement, whether as a result of new
information, future events or otherwise. DATASOURCE: Pearson Plc
CONTACT: Luke Swanson or Charlotte Elston, both for Pearson Plc,
+44-20-7010-2310 Web site: http://www.pearson.com/
http://www.safarix.com/
Copyright
Interactive Data (NYSE:IDC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Interactive Data (NYSE:IDC)
Historical Stock Chart
From Jul 2023 to Jul 2024