The Herald

Pearson shares fall despite strong results


FINANCIAL Times owner Pearson yesterday announced above-forecast profit and said it was confident 2008 would be another good year although it trimmed its revenue growth outlook in some areas, knocking its shares.

The company said group operating profit rose 14% to £634m, with the correspond­ing gains in education, Penguin and the FT Group at 9%, 20% and 30%, respective­ly.

Adjusted earnings per share rose to 46.7p from 43.1p. Earnings per share before amortisati­on and exceptiona­l charges were seen at 45.60p, within a 43p to 45.90p range, based on the average forecast from 15 analysts.

It raised its dividend 7.8% to 31.6p a share.

The company, which generates around two-thirds of its sales and operating profit from education-related business, said underlying sales growth in its schools business was likely to be between 3% and 4% this year if its recent Harcourt acquisitio­n is not taken into account. It was 6% last year.

Margins in the schools business are expected to be similar to 2007 and rise to around 15% in 2009, with percentage sales growth there “well into double digits” this year on a constant currency basis, boosted by the Harcourt deal.

“We will have integratio­n costs from the Harcourt testing business which will be meaningful, so you should infer from that that we will be adding to our margins but for those costs,” said Pearson chief executive Marjorie Scardino.

Profession­al publishing is set to deliver low single-digit underlying revenue growth, compared with 9% last year. At the start of 2007, Pearson predicted flat growth in this division and then went on to upgrade its estimate twice.

In higher education, 2008 underlying sales growth is seen at a mid single-digit percentage, a little ahead of the industry, Pearson said. This compares with 5% growth in 2007.

Margins at book-publishing arm Penguin are expected to improve further, while the Financial Times division was likely to lift profit without any growth in advertisin­g revenue.

ABN Amro analyst Paul Gooden said Pearson’s outlook statement was slightly disappoint­ing. He rates Pearson a “hold” given the outlook statement was no worse than could have been expected, Pearson’s sales being secondhalf weighted and with a valuation that is “reasonable rather than bargain basement”.

Pearson makes around 90% of its pre-tax profit in the second half.

Shares in Pearson fell 3%, or 17.5p, to 648.5p – Reuters

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