Pearson (PSON)


Pearson jumps despite mixed bag of results

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Pearson jumps despite mixed bag of results

Educational publisher Pearson (PSON) reported a fall in adjusted earnings of more than 30% for the first half of the year, more or less in line with expectations, and said it was exploring a sale of Mergermarket, the financial intelligence business it acquired for £101 million in 2006. This now makes £100 million in revenues annually, and JP Morgan has been appointed to crank up the process.

Revenues were up 7% year-on-year to £2.75 billion, with adjusted operating profits down 26% to £137 million against a challenging environment in publishing, but the media giant kept its full-year guidance unchanged. Pressure on education budgets remains, although the company has had some success in strengthening its digital services with education digital platform registrations up by 19%.

Digital subscriptions at the Financial Times climbed 14% year-on-year to 343,000 in the first half, with paid circulation up slightly over the same period last year. Even better, mobile access is the preferred choice for over half of subscribers, nearly one quarter of new digital subscriptions and over a third of total page views.

The Economist Group, in which Pearson has a 50% stake, also made good headway in digital, which accounted for 39% of its total revenues in the year to 31 March, while non-advertising revenues delivered 60% of the total.

Overall, the results were a mixed bag with encouraging organic revenue growth, but lower-than-expected operating profit before restructuring charges. Growth in digital, services and developing-market businesses more or less offset tough conditions for traditional publishing.

The Mergermarket disposal, which is expected to fetch up to £200 million, prompted more of the perennial speculation over whether the FT is also up for sale, talk that has intensified since John Fallon replaced Marjorie Scardino as chief executive last autumn. Fallon denied the FT had been put into play, saying the newspaper was still a good fit with its professional learning strategy.

Reorganisation of Pearson into one globally-connected education company will eat away £150 million in restructuring charges this year. From 2014 Pearson is being organised around three global lines of business: school, higher education and professional; and three geographic markets: North America, growth and core.

Investec analyst Steve Liechti said he could see no particular catalysts for the business. "The US education/Fed/State funding hiatus continues, but we see some more positive 'straws in the wind'," he said.

"We like the new CEO's more aggressive, proactive approach; the execution is still unclear, but we believe better growth and returns are possible."

Book publisher Penguin, which was merged with Random House on 1 July, reported a strong first half with adjusted operating profit up 27% to £28 million on revenues up 16% to £513 million. Results were lifted by blockbusters John le Carré's A Delicate Truth and Khaled Hosseini's And the Mountains Echoed. From July 2013 it will be treated only as an associate.