72% rise in profits at Pearson

Pearson Plc has reported 2011 Preliminary results.

 

Financial performance

  • Sales up 6% at CER in spite of tough trading conditions in many markets.
  • Adjusted operating profit up 12% to £942m with growth in all businesses.
  • Adjusted EPS up 12% to 86.5p (headline growth).
  • Cash conversion remains strong at 104%; operating cash flow of £983m (£1,057m in 2010, which benefited from an unusually high working capital contribution).
  • Return on invested capital of 9.1%, above Pearson’s cost of capital; ROIC lower than in 2010 largely due to significant acquisition spend and higher cash tax.

Growth markets

Digital revenues up 18% in headline terms to £2bn, now 33% of Pearson’s sales. Substantial digital growth in all parts of Pearson including:

  • Students using digital learning programmes up 23% to 43m.
  • Penguin eBook revenues up 106%; now 12% of total Penguin revenues.
  • FT digital subscriptions up 29% to 267,000; approximately 44% of total paid circulation.

Developing markets revenues up 24% in headline terms to $1bn ($834m in 2010), now 11% of Pearson’s sales.

Other highlights

  •  Operating margins reach 16.1% (up 1.0% points)
  • £896m invested in acquisitions including Schoolnet and Connections Education in North America and Global Education in China.
  • Balance sheet net debt of £499m – approximately £1bn of headroom available for bolt-on acquisitions.
  • Dividend raised 9% to 42.0p, representing Pearson’s 20th consecutive dividend increase.

Outlook

  • Pearson expects to achieve continued sales and operating profit growth in 2012, in spite of tough trading conditions and rapid industry change.
  • Revenues from digital and services businesses expected to exceed revenues from traditional publishing businesses in 2012.

Marjorie Scardino, chief executive, said: “The external environment provides a testing backdrop for these results, and all our industries face some degree of turbulence. But our strategy and long-term planning for change have helped us to another good year to add to our record of persistent out-performance. We believe those qualities, combined with the commitment and innovation of our people, will continue to serve our customers and our shareholders well.”

Financial summary

£ millions

2011

2010

Headline growth

CER growth

Underlying growth

Business performance
Sales

5,862

5,663

4%

6%

1%

Adjusted operating profit*

942

857

10%

12%

7%

Adjusted earnings per share

86.5p

77.5p

12%

Operating cash flow

983

1,057

(7)%

Free cash flow

772

904

(15)%

Free cash flow per share

96.5p

112.8p

(14)%

Return on invested capital

9.1%

10.3%

(1.2)% pts

Net Debt

499

430

(16)%

Statutory results
Sales

5,862

5,663

4%

Operating profit

1,226

743

65%

Profit before tax

1,155

670

72%

Basic earnings per share

119.6p

161.9p

(26)%

Cash generated from operations

1,093

1,169

(7)%

Dividend per share

42.0p

38.7p

9%

* Continuing operations

Divisional analysis

£ millions

2011

2010

Headline growth

CER growth

Underlying growth

Sales
North American Education

2,584

2,640

(2)%

1%

(1)%

International Education

1,424

1,234

15%

15%

4%

Professional

382

333

15%

17%

2%

FT Group

427

403

6%

8%

7%

Penguin

1,045

1,053

(1)%

1%

1%

Total

5,862

5,663

4%

6%

1%

Adjusted operating profit
North American Education

493

469

5%

9%

8%

International Education

196

171

15%

13%

2%

Professional

66

51

29%

31%

10%

FT Group

76

60

27%

22%

17%

Penguin

111

106

5%

8%

8%

Total continuing

942

857

10%

12%

7%

Read the full announcement

UK, London

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