Media group Pearson expects to keep growing faster than its markets and to strengthen profit margins, it said yesterday as it defended the rationale for keeping its divisions together despite break-up speculation.
The publisher of online teaching materials, Penguin books and the Financial Timesreported record operating profits, earnings and free cash flow for 2006, with double-digit profit increases in each division.
Marjorie Scardino, chief executive, said Pearson's investments in content, technology and international expansion were paying off, and described the group as "a pretty cohesive set of businesses that have characteristics in common".
Ms Scardino noted that four rival educational publishers had been put on the market in recent months. She would not comment on whether Pearson would participate in auctions being held by Wolters Kluwer, Thomson Corporation or Reed Elsevier but said: "Our first focus is really on organic growth."
Adjusted for a £302 million profit on the 2005 disposal of Pearson's stake in Recoletos, the Spanish newspaper group, pre-tax profits rose 19 per cent to £502 million and earnings per share rose 18 per cent to 40.2p, helped by favourable tax settlements - a result slightly ahead of guidance.
Reported pre-tax profits rose 4 per cent to £466 million on a 9 per cent increase in turn-over to £4.14 billion and earnings per share dropped from 78.2p to 55.9p. The group announced an 8.5 per cent lift in its dividend to 29.3p a share and said that in future it would raise pay-outs "more in line with earnings" than with inflation.
Pearson Education reported a 12 per cent increase in adjusted operating profits as its US school business rose 3 per cent, taking share in a market that was down 6 per cent. Ms Scardino highlighted the growth in digital products, which now account for 23 per cent of the division's revenues.
For 2007, Pearson forecast underlying sales growth of 4-6 per cent in the schools business, 3-5 per cent growth in higher education and "broadly level" professional revenues.
The FT Group improved profits by 18 per cent after growth in luxury and corporate finance advertising lifted profits at the Financial Timesfrom £2 million to £11 million. It forecast strong profit growth for 2007, highlighting moves to diversify revenues and predicting a rise in margins from 8.7 per cent to double digits in 2007.
Penguin's profits advanced by 22 per cent in 2006 after a strong showing from new authors. In 2007, Penguin's margins would improve further, Ms Scardino said.
- (Financial Times service)
