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.
The Financial Times has been badly hit by falling advertising revenues, particularly in the finance and technology sectors . Ad volumes are thought to have been 18% down at the paper during the first half of the year.
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 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.
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