Pearson Results Show FT Profits Hit By Ad Downturn
Pearson’s interim financial results showed a pre-tax profit of £5 million, ahead of the expected consensus loss of £10 million and slightly below the £11 million profit forecast by ABN Amro. A difficult period in terms of revenues in both its education businesses and advertising generally has caused Pearson’s stock to weaken recently.
Profits at the FT were down by 19% and Pearson says it is reducing costs across its newspaper business. Following these cost-cutting measures, Pearson expects the paper to deliver margins of more than 20% – “in the face of the sharpest advertising downturn for a decade.” Nevertheless, current advertising levels indicate that FT Group profits will be some 15% behind 2000.
The ad slowdown in the European broadcasting sector was also sharply felt in the figures from RTL, in which Pearson has a 22% stake. The earnings contribution from the RTL Group, at £33 million, reflect its announcement today (see RTL Issues Second Profits Warning And Offers No Visibility) that, due to the weakness in the advertising market, it expects full year EBITA to be 10-15% below the 2000 pro forma level of €555 million, before new investments and US restructuring totalling €50 million.
During the six months to 30 June 2001, Pearson spent £81 million in internet investments; this is slightly down on the £84 million spent during the same period last year. The net costs of internet enterprises in the second half are expected to be some £60 million, down 45% on the same period last year.
The Penguin Group will benefit from a strong second half schedule of new titles, offset by continued industry-wide softness in back-list sales, the company said.
Operating profit at the group rose by 18% to £174 million. Sales were up 21% at £1.88 billion.
| Pearson plc interim results (unaudited) | |||
| Six months ended 30 June 2001 | |||
| Six months to 30 June 2001 | Six months to 30 June 2000 | % Change | |
| Sales | £1,876m | £1,545m | 21% |
| Operating profit (pre Internet enterprises)* | £174m | £148m | 18% |
| Investment in Internet enterprises | £(81)m | £(84)m | |
| Pre-tax profit (post Internet enterprises)* | £5m | £(4)m | |
| Adjusted earnings per share – pre Internet enterprises | 6.8p | 8.9p** | -24% |
| Adjusted earnings per share – post Internet enterprises | (2.6)p | (0.6)p** | |
| Dividend per share | 8.7p | 8.2p** | 6% |
At 11:00am today, Pearson stock was up 7p at 1,045p.
ABN Amro: Hold JP Morgan: Market Perform, target reduced from 1,350p to 1,150p UBS Warburg: Hold Credit Lyonnais: Add
