Pearson profit shrinks 17%

March 5, 2001
Web posted at: 1731 GMT

LONDON (CNN) - Pearson, publisher of the Financial Times, said on Monday its full-year profit fell 17 percent as Internet investments trimmed its bottom line.

The British firm, the world's largest education publisher with imprints like Prentice Hall, also sought to allay investors' worries by saying its online education unit would break even by the end of 2003.

Pearson (PSON) said its pretax profit for the year ended December 31 fell to £333 million ($492 million) from £402 million in the previous year. Profit was hit by a £196 million investment in its Internet businesses. Analysts had been expecting a pretax profit of £320 to £350 million.

Marjorie Scardino, Pearson's  chief executive, was upbeat about the results.

"For the fourth straight year, we increased our organic revenue growth, improved our margins, and turned in a good cash performance. All the time, we are making the moves that enable Pearson to grow more quickly and more profitably," she said in a statement.

Pearson said it was "in good shape to deliver another year of strong revenue and earnings growth."

Pearson shares fell 2.6 percent to 1,520 pence in midday London trade.

Sales at Pearson, which publishes books by action author Tom Clancy and funky British chef Jamie Oliver under the Penguin brand and also has a 50 percent stake in the company behind The Economist magazine, increased 16 percent to £3.87 billion, while underlying sales grew by 9.2 percent.

At its education unit, sales increased by 20 percent to £2.04 billion,  boosted by contributions from the purchase of U.S. education software firm National Computer Systems.

Scardino told CNN that the company was "better protected" against a downturn in the world economy because of its investment in education.

"Governments around the world realize that education is key to the future," she said. 

Pearson has spent more than £300 million on its Internet investments. The company is developing a learning network for children between the ages of 5 and 18. The Learning Network also offers careers guides and life long learning opportunities.

Pearson has also invested heavily in FT.com, its news and information Web site, which was delivering "significant revenues," Scardino said.

The Financial Times newspaper's worldwide advertising increased by 34 percent in the year and was continuing to increase in the first two months in 2001.

The FT internet businesses were on track to break even by the end of 2002, in line with Pearson's estimate made in December, the company said.

Scardino said the company plans to be No. 1 and No. 2 in all the fields it participates in through "partnership, rather than consolidation,"  but would be actively increase scale in its business on the European continent through acquisitions.

Scardino, the only woman at the helm of a FTSE 100 company, has transformed Pearson from an unwieldy collection of disparate but upmarket assets into a focused education and media player. The company has paid big money to develop learning businesses such as Longman publishing and Simon & Schuster.

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