72% rise in profits at Pearson

February 28, 2012 — Fusion DigiNet

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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Pearson to sell 50% stake in FTSE to the London Stock Exchange for £450 million

December 15, 2011 — Fusion DigiNet

Pearson has agreed to sell its 50% stake in FTSE International Limited to the London Stock Exchange Group for £450 million in cash.

FTSE is a world-leader in the creation and management of more than 200,000 equity, bond and alternative asset class indices. With offices in London, Frankfurt, Hong Kong, Beijing, Shanghai, Madrid, Milan, Mumbai, Paris, New York, San Francisco, Sydney and Tokyo, FTSE works with partners and clients in 80 countries worldwide.

Marjorie Scardino, Pearson’s chief executive, said: “FTSE is a bellwether of global financial markets and a world-class business. We have enjoyed supporting the company’s excellent and highly professional team to build the business. Proud as we are of that long association, FTSE’s strategy is different from our own. We wish it every success as we continue to build our digital business information services around the Financial Times.”

Pearson and London Stock Exchange Group currently each own 50% of FTSE. Under the terms of the agreement, London Stock Exchange Group will acquire from Pearson the 50% of FTSE that it does not own and continue to use the FTSE name. The transaction is expected to close by the first quarter of 2012.

In 2010, FTSE reported total revenues of £98.5 million and total EBITDA of £40 million. At 31 December 2010, FTSE had gross assets of £100.8m.

Pearson expects FTSE to make a total post-tax contribution to Pearson’s adjusted earnings of approximately £18 million or 2.2p per share in 2011.

The transaction follows the sale of Pearson’s stake in Interactive Data last year for $2bn. It marks Pearson’s exit from companies that are primarily providers of financial data and strengthens the FT Group’s focus on global business news, analysis and intelligence, increasingly delivered through subscription models and digital channels.

Pearson intends to use the proceeds of the sale to support and accelerate its strategy, investing in its businesses both organically and through acquisitions of companies with complementary content, technology and geographic exposure. In recent years Pearson’s organic investments have enabled it to gain share in many of its markets. The company has also made a series of bolt-on acquisitions (including vocational training companies in the UK, global business intelligence through Mergermarket, universities in South Africa, online learning businesses in North America, language schools in China and school systems in Brazil) which have rapidly enhanced Pearson’s earnings and return on invested capital.

UK, London

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