First half tougher than expected at Pearson

Operating profit at Pearson came in a little shy of some expectations as the publishing group admitted that the first half of 2012 had been a little tougher than expected for some parts of the business.

Adjusted operating profit fell by a tenth to £188m from £208m in the first half of 2011. The decline was entirely down to the fact that there was no contribution this time round from FTSE International, following the sale of the company's stake in the indices calculation agency last year. Broker Charles Stanley had forecast operating profit of £195m.

Statutory profit before tax was £59m (£82m in 2011).

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Sales climbed 7%, or 6% on a constant exchange rates (CER) basis, to £2,583m from £2,416m the year before. The sales figure was £7m short of Charles Stanley's forecast.

Pearson, which publishes the Financial Times (FT), highlighted strong top line growth of 9% in the group's core Education division and 7% growth in sales at the FT Group, but the Penguin books division saw sales dip 4% year-on-year because of the phasing of the publishing schedule, not to mention "continued industry change".

Talking of "continued industry change", the group said that revenues from digital and services this year will exceed traditional publishing businesses for the first time in the group's history.

Net debt, which usually reaches a seasonal peak around the half-year and is mainly dollar-denominated, was £1,178m at the end of June, down from £1,275m a year earlier, with the reduction largely due to proceeds from the sale of the group's stake in FTSE International.

Pearson reiterated its full year pledge to achieve growth in sales and operating profits this year, subject to exchange rate fluctuations. The group is expecting "good trading momentum" in North America, International and the FT Group, which should offset weakness in Professional Education and Penguin.

"We began 2012 planning for a challenging external environment and our caution was well-placed: conditions have been tough in the early part of this year and, for a couple of parts of Pearson, tougher than expected," admitted Marjorie Scardino, Pearson's Chief Executive Officer.

"We've kept up the pace of transformation, and continued our shift towards digital and services businesses, which this year for the first time will yield the majority of Pearson's revenues. That strategy will enable us to deliver on our long-term goals of expanding our market opportunity, delivering consistently strong financial performance and helping all kinds of students in all kinds of places to learn," Scardino added.

The interim dividend has been lifted to 15p from 14p last year.

JH