Pearson plc Announces Six Month Results.NEW YORK--(BUSINESS WIRE)--Aug. 3, 1998-- -0-
PEARSON PLC INTERIM RESULTS (unaudited)
Six months ended 30 June 1998
PEARSON MAKES STRONG START TO 1998
(pound)m 1998 1997 % 1997
half year half year change full year
Sales 989.0 957.6 +3% 2,293.1
- continuing operations 944.5 898.3 +5% 2,118.6
Operating profits 106.1 69.1 +54% 328.2
- continuing operations 107.3 82.9 +29% 320.8
Adjusted earnings
per share 10.8p 6.0p +80% 34.9p
Dividends per share 8.0p 7.5p +7% 19.5p
- Record first half profits
- Good progress on financial targets
- Completion of Simon & Schuster acquisition on track
Commenting on the results, Marjorie Scardino, Pearson's chief
executive, said:
"We have made a strong start to 1998. These are good operating results
which give us confidence that we can meet our financial goals for the
year. While our reshaping of Pearson and the building of
market-leading businesses has gathered momentum, we have made the task
of delivering on our sales, margin and cash targets our priority."
42
OVERVIEW
In the first six months of 1998, operating profits from
continuing operations increased by 29% to (pound)107.3m and we
generated operating cashflow of (pound)47.4m compared to an outflow of
(pound)60.7m in 1997. Pre tax profits, before exceptional items,
increased to (pound)85.6m from (pound)49.4m. With adjusted earnings
per share up 80%, Pearson made good progress in meeting its financial
targets.
Pearson's continuing business operations made an encouraging
start to 1998. A very strong performance by the US schools business
led to a sharp reduction in the first half losses traditionally made
by the Pearson Eduitions. The
Tussauds Group traded solidly and Lear.
FINANCIAL TIMES GROUP
(pound)m Operating profit:
FT newspaper 26 17.2 15.0 +15% ge daily sales were up 13% to 354,000 and a
dvertanded businesses, our electronic text products developed
in line with expectations as we continued to invest in both
infrastructure and content to improve their competitive position. The
website, FT.com, which is being positioned as the gateway of all FT
branded electronic products, notched up its one millionth registered
user. With the disposal of our professional publishing businesses, we
took concerted action to reduce costs and enhance margins in our
specialist businl
currency.
In Associates, The Economist Group continued to grow its profits.
The overall contribution from Associates was affected by the timing of
the acquisition of Pearson's 50% stake in the Financial Mail and
Business Day in South Africa, which achieved record circulation but
suffered from the weakness of the rand against sterling.
PEARSON EDUCATION
(pound)m 1998 1997 % change 1997
half year half year full year
Sales 180.4 168.3 +7% 563.6
Operating (loss)/profit (19.5) (29.9) +35% 60.4
The first six months of the year are always loss-making for the
Pearson Education business because of the seasonality of its sales.
However, steps taken by the new management team to reduce costs and
capitalise on strong market growth started to deliver results. The US
schools business got off to a very strong start, driven by the success
of new elementary math and science programmes in US state school
adoptions in Florida and other southern states. The US college
business performed in line with expectations, with intensive efforts
to strengthen both its publishing list and sales and marketing
operations. The International business started to benefit from more
aggressive global and local marketing strategies.
The proposed acquisition of the Simon & Schuster business from
Viacom Inc is on track for completion later this year. Pearson's
shareholders have approved the acquisition, bank financing is in place
and an agreement has been reached to sell on the Reference and
Business & Professional divisions to Hicks, Muse, Tate & Furst, a
leading US private investment firm. The second quarter results, issued
by Viacom last week, confirm that the overall trading performance of
the Simon & Schuster education business is in line with our
expectations. We anticipate that the transaction will be completed by
the end of 1998 subject to regulatory approvals, including the
expiration of the Hart-Scott-Rodino waiting period in the US. The new
business will be called Pearson Education.
THE PENGUIN GROUP
(pound)m 1998 1997 % change 1997
half year half year full year
Sales 231.4 241.2 -4% 524.8
Operating profit 15.4 21.2 -27% 57.8
The Penguin Group continued to perform strongly in the bestseller
lists in the US, UK and Australia, breaking a number of new authors.
Compared with 1997, first half profits reflected the loss of income
from the sale of our stake in Troll, the children's book publisher, in
June 1997. Also, in 1998, the publication of major new titles by
established authors, such as Tom Clancy and Patricia Cornwell, is more
heavily geared to the second half th/(loss):
Pearson TV 33.1 28.2 +17% 46.1
Channel 5 (7.7) (11.7) +34% (24.1)
BSkyB 2.0 1.9 3.9
27.4 18.4 +49% 25.9
Profits at Pearson Television, excluding Channel 5 and BSkyB,
increased by 17%, boosted by the acquisition of All American
Communications. The businesses have now been fully integrated
delivering (pound)10m of savings in 1998, and enabling Pearson
Television to focus on using its extensive range of programme formats
to break into new international markets, particularly in Latin America
and Europe. Compared to 1997, Pearson TV lost some income from
dividends following the sale of a number of broadcasting interests and
the timing of international sales. Channel 5, in which Pearson owns a
24% stake, increased its audience share, which is the key driver of
future advertising revenue growth.
THE TUSSAUDS GROUP
(pound)m 1998 1997 % change 1997
half year half year full year
Sales 44.7 47.0 -5% 107.3
Operating profit 2.4 4.9 -51% 26.1
Madame Tussaud's performed well, plans for new exhibitions in Las
Vegas and New York continued to time and budget and the new Oblivion
ride drew in the crowds at Alton Towers.
LAZARD
(pound)m 1998 1997 % change 1997
half year half year full year
Attributable profit 14.8 8.9 +66% 43.1
The three Lazard houses all made a strong start to the year, with
Lazard Brothers in particular advising on some major transactions. The
steady flow of activity leads us to expect a more even phasing of fee
income than in 1997.
DISCONTINUED BUSINESSES
(pound)m 1998 1997 % change 1997
half year half year full year
Mindscape and PNE
Sales 44.5 59.3 -25% 174.5
Operating (loss)/profit (1.2) (13.8) 7.4
In the first half of 1998, the process of disposing of passive
investments and businesses that lack critical mass or are likely to be
worth more to others than to Pearson gathered pace. Pearson raised
some (pound)500m through the sale of FT Law & Tax, Capitol Publishing,
Mindscape, Future Publishing, Edicorp, and stakes in Port Aventura,
the Spanish theme park and SES, owners of the Astra satellite system.
In June, Pearson announced that it has started the process which could
lead to the sale of The Tussauds Group.
OUTLOOK
Pearson has made a good start to the second half of the year. We
remain committed to our target of annual double digit earnings growth.
Consolidated Profit and Loss Account
for the six months to 30 June 1998
1998 1997 1997
restated restated
Note half year half year full year
(pound)m (pound)m (pound)m
Sales 2
Continuing operations 944.5 898.3 2,118.6
Di - group 91.8 70.5 274.0
Discontinued operations (1.2) (13.8) 7.4
Total operating profit - group 90.6 56.7 15.5 12.4 46.8
Tot0
Profit on sale of businesses and
associatere interest 379.0 100.4 80.7 128.6
Taxation it for the financial period 278.2 63. 48.1p 11.1p 6.7p
Adjusted earnings per equity
share 5 10.8p
Dividends per equity share (see note 1), of the full accounts which have rm ordinary dividend of 8.0p
per equity share, pe to a cash dividend.
Consolidated Balance Sh 416.2 379.3
Debtors 668.0 601.2 747.3
Creditors (514.8) (513.3) (609.6)
Investments and
other net assets 57.2 100.0 51.9
Net trading assets 1,121.6 1,094.9 1,074.9
Shareholders' funds 595.4 396.6 152.5
Provisions and minorities 212.4 139.0 215.3
Net debt 313.8 559.3 707.1
Capital employed 1,121.6 1,094.9 1,074.9
Reconciliation of Movements in Equity Shareholders' Funds
for the six months to 30 June 1998
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
Profit for the
financial period 278.2 63.6 38.3
Dividends on equity
shares (46.5) (43.1) (112.4)
231.7 20.5 (74.1)
Exchange differences (11.1) (2.0) (20.6)
Goodwill arising on
prior year acquisitions (1.8) (19.4) (401.5)
Goodwill written back 210.8 0.7 232.9
Shares issued 13.3 8.2 27.2
Net movement for
the period 442.9 8.0 (236.1)
Equity shareholders' funds
at beginning of period 152.5 388.6 388.6
Equity shareholders' funds
at end of period 595.4 396.6 152.5
Operating Cash Flow, Net Movement of Funds from Operations and
Change in Net Debt
for the six months to 30 June 1998
The following analysis summarises the group's main cash flows and is
in the format used by management to monitor the cash flow of the
group. The main difference between this format and the FRS 1 cash flow
format is that operating cash flow, a key measure, is calculated after
the deduction of capital expenditure.
1998 1997 1997
half year half year full year
Note (pound)m (pound)m (pound)m
Operating profit 106.1 69.1 328.2
Movement in partnerships
and associates 9.8 8.5 (7.3)
115.9 77.6 320.9
Working capital (stocks,
debtors, creditors) increase (42.8) (112.8) (138.1)
Net expenditure on tangible
fixed assets (capital
expenditure
less disposals) (50.7) (42.0) (97.0)
Depreciation 32.7 30.9 65.2
Other movements (7.7) (14.4) 7.8
Operating cash flow 47.4 (60.7) 158.8
Interest (28.6) (22.1) (36.6)
Taxation (69.5) (64.0) (107.0)
Net .4)
Sale of businesses and investments 8 564 27.2
Other (including non
operating provisions) (10.8) (16.4) (11.6)
Net movement of funds 396.0 (121.1) (254.7)
Net debt at beginning of year (707.1) (430.4) (430.4)
Exchange differences on net debt (2.7) (7.8) (22.0)
Net debt at end of period ation
The interim results for the half yemparative figures have been restated to reflect
angible
Assets" has also been adopted. Purchasirst half 1998 is not material.
2. Sector Analysis
Sales Operating profit
---------------------- --------------------------
1998 1997 1997 1998 1997 1997
half year half year full year half year half year full year
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
Analysis of sales
and operating
profit by
business
FT Group 335.1 334.8 676.3 66.8 59.4 107.5
Pearson Education 180.4 168.3 563.6 (19.5) (29.9) 60.4
The Penguin Group 231.4 241.2 524.8 15.4 21.2 57.8
Pearson Television 152.9 107.0 246.6 27.4 18.4 25.9
The Tussauds Group 44.7 47.0 107.3 2.4 4.9 26.1
Lazard - - - 14.8 8.9 43.1
Continuing
operations 944.5 898.3 2,118.6 107.3 82.9 320.8
Discontinued
operations 44.5 59.3 174.5 (1.2) (13.8) 7.4
989.0 957.6 2,293.1 106.1 69.1 328.2
Discontinued operations relate to the withdrawal of the group from the
consumer software business following its disposal of Mindscape Inc in
March 1998 and the withdrawal of the group from the consumer magazine
business following its disposal of Pearson New Entertainment in April
1998.
1997 full and half years have been reanalysed to reflect the expanded
business groupings.
Included in the analysis of operating profit above are the
following amounts in respect of associates:
Associates
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
FT Group 6.9 7.6 16.4
Pearson Education 1.8 3.2 3.4
The Penguin Group - 1.0 0.6
Pearson Television (6.0) (7.9) (20.5)
The Tussauds Group (2.0) (0.4) 3.8
Lazard 14.8 8.9 43.1
Continuing operations 15.5 12.4 46.8
2. Sector analysis -- continued
In previous periods Pearson has incurred significant restructuring
costs which, due to their size, were classified as exceptional within
operating profit. 1998 first half restructuring costs are shown in the
table below.
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
FT Group 1.1 0.2 14.0
Pearson Education - - 11.7
Others 0.2 3.1 0.8
All American Communications
(post acquisition) - - 4.2
Continuing operations 1.3 3.3 30.7
Discontinued operations - 3.7 3.7
1.3 7.0 34.4
3. Profit on sale of fixed assets and investments
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
Profit on sale of investment
in Societe Europeene des
Satellites (note 8) 132.4 - -
Profit on sale of investment
in Flextech plc - 23.9 23.9
Profit on sale of investment
in Television Broadcasts
Limited - 4.2 4.1
Net (loss)/profit on other
investments and property
interests (3.1) 3.2 (5.0)
Continuing operations 129.3 31.3 23.0
4. Profit/(loss) on sale of businesses
and associates 1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
Profit on sale of
Port Aventura S.A. (note 8) 28.7 - -
Profit on sale of Law & Tax
publishing businesses (note 8) 61.0 - -
Profit on sale of 20% of
Recoletos (note 8) 33.9 - -
Profit on sale of
Churchill Livingstone - - 30.4
Profit on sale of Troll
Communications LLC - - 12.5
Net loss on sale of
other businesses (11.3) - (9.7)
Loss on sale of a business
by an associate - - (1.5)
Continuing operations 112.3 - 31.7
Loss on sale of Mindscape
Inc (note 8) (10.9) - -
Profit on sale of Pearson
New Entertainment (note 8) 42.2 - -
Provision against goodwill
on sale of Mindscape Inc - - (212.0)
Discontinued operations 31.3 - (212.0)
5. Earnings and adjusted earnings per equity share
In order to show results from operating activities an adjusted
earnings per equity share has been calculated which excludes
profits/(losses) on the sale of fixed assets and investments,
businesses and associates (see notes 3 and 4) and year 2000 compliance
costs. Following the prospective implementation of FRS10 'Goodwill and
Intangible Assets', goodwill amortisation has also been excluded from
adjusted earnings in order to show results on a comparable basis.
----------------------------------------------------------------------
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
----------------------------------------------------------------------
Profit for the
financial period 278.2 63.6 38.3
Less:
(Profit) on sale of fixed
assets: continuiions (31.3) - 212.0
Add: Year 2000 compliance costs 3.6 - ---------------------------------------------------------
----
Weighted average number of
equity shares (97 the effect of acquisitions, disposals and certain
non-recurring items has been disaggregated in the table below.
----------------------------------------------------------------------
Note below 13.1
Disposals 8 3.4
Foreign exchange translati 106.1
----------------------------------------------------------------------
All American Commu1998 are shown in the table below:
---------
Consideration
Cash (40.2) (56.8) (97.0)
Deferred consideration - 8.4 8.4
----------------------------------------------------------------------
Total consideration (40.2) (48.4) (88.6)
Net trading assets acquired 40.2 30.2 70.4
Embedded net cash - (0.2) (0.2)
----------------------------------------------------------------------
- 18.4 18.4
----------------------------------------------------------------------
Analysed as:
Goodwill - 16.6 16.6
Goodwill written off to
reserves on prior year
acquisitions - 1.8 1.8
----------------------------------------------------------------------
- 18.4 18.4
----------------------------------------------------------------------
Total cash effect (40.2) (57.0) (97.2)
----------------------------------------------------------------------
On 16 March 1998 Pearson acquired a 10% stake in Antena 3, a
commercial television channel in Spain, for consideration of
(pound)40.2m (see note 8).
Other acquisitions includes Pasha Publications with cash consideration
of (pound)10.9m and Simon & Schuster acquisition costs of
(pound)23.6m, principally relating to the loan finance facility.
On 18 May 1998 Pearson announced that it proposed to acquire part of
the Simon & Schuster business, representing the children's learning,
higher education and business, professional and reference divisions,
from Viacom for $4.6 billion with the intention to on-sell the
business, professional and reference division. On 31 July the
acquisition was approved by shareholders but it remains conditional on
regulatory clearance.
8. Sale of businesses and investments
Details of proceeds from disposals made in the first six months of
1998 are shown in the table below:
------------------- Subsidiaries and associates----------------------
Law & Tax Port
businesses Mindscape PNE Aventura Recoletos Other Total
Note (i) (ii) (iii) (iv) (vi)
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m(pound)m
----------------------------------------------------------------------
Net
trading
assets 2.4 (27.1) 7.8 (19.3) (30.4) (11.9) (78.5)
Net
borrowing - - (5.3) - - (1.0) (6.3)
Goodwill
written
back (7.5) (70.1) (80.0) (8.3) (22.8) (22.1) (210.8)
----------------------------------------------------------------------
Net
assets (5.1) (97.2) (77.5) (27.6) (53.2) (35.0) (295.6)
Proceeds
net of
costs
paid 68.0 69.2 123.0 56.3 87.1 11.2 414.8
Deferred
consid-
eration
and
expenses (1.9) 17.1 (3.3) - - 12.5 24.4
----------------------------------------------------------------------
Profit/
(loss)
before
tax 61.0 (10.9) 42.2 28.7 33.9 (11.3) 143.6
----------------------------------------------------------------------
Total
cash
effect
(subsid-
iaries
and
asso-
ciates) 68.0 69.2 117.7 56.3 87.1 10.2 408.5
----------------------------------------------------------------------
Proceeds on sale of investment in 155.7
Societe Europeene des Satellites
(note v)
----------------------------------------------------------------------
Total cash effect including 564.2
investments
----------------------------------------------------------------------
On 2 March 1998 Pearson sold its specialist Law & Tax Publishing
business for (pound)66.1m giving rise to a profit of (pound)61.0m,
before tax estimated at (pound)14m.
On 5 March 1998 Pearson entered into an agreement to sell
Mindscape Inc. As a result of this agreement a provision of
(pound)212m was established in 1997 against the goodwill
that arose on the acquisition of Mindscape Inc to reflect
its net realisable value. On 27 March 1998 the agreement
became unconditional and Mindscape Inc was sold for
(pound)86.3m in cash and stock giving rise to a loss on
sale, before tax, of (pound)10.9m.
In April 1998 Pearson sold Pearson New Entertainment, its
consumer magazine business, for (pound)119.7m giving rise to
a profit on sale of (pound)42.2m before tax estimated at
around (pound)11m.
On 22 June 1998 Pearson sold its 40.5% interest in Port Aventura
S.A., the Spanish theme park, for (pound)56.3m, giving rise to a
profit on sale of (pound)28.7m before tax estimated at around
(pound)5m. This includes compensation of (pound)18m from Port
Aventura S.A. for the cancellation of the management agreement.
On 9 February 1998 Pearson sold its 6.3% shareholding in Societe
Europeene des Satellites (S.E.S.) for (pound)159.9m. The sale
was made cum dividend and consequently (pound)4.2m has been
included in operating profit leaving a profit of (pound)132.4m
before tax estimated at around (pound)24m.
On 16 March 1998 TelefoAica de Espana S.A., the Spanish
telecommunications group, paid (pound)87.1m for a 20% stake in
Recoletos, which then paid (pound)40.2m for a 10% stake in
Antena 3, a commercial television channel in Spain (see note 7).
9. Taxation
The tax rate provided in the profit and loss account is analysed
as follows:
1998 1997 1997
half year half year full year
% % %
----------------------------------------------------------------------
United Kingdom tax rate 31.0 31.5 31.5
Effect of utilisation of
tax losses in the USA (3.6) (3.0) (4.3)
Other items 0.6 0.4 2.2
----------------------------------------------------------------------
Tax rate reflected in
adjusted earnings 28.0 28.9 29.4
Effect of profits/(losses)
excluded from adjusted earnings (6.2) (8.6) 39.5
----------------------------------------------------------------------
Tax rate reflected in earnings 21.8 20.3 68.9
----------------------------------------------------------------------
Taxation is analysed as:
1998 1997 1997
half year half year full year
(pound)m (pound)m (pound)m
----------------------------------------------------------------------
Parent and subsidiaries 74.3 10.9 78.8
Associates 4.0 5.5 9.8
----------------------------------------------------------------------
78.3 16.4 88.6
----------------------------------------------------------------------
10. Exchange Rate
Pearson earns a significant proportion of its sales and profits
in overseas currencies, the most prominent being the US dollar and the
Spanish peseta. The relevant rates are as follows:
----------------------------------------------------------------------
(pound)versus US$ (pound)versus peseta
1998 1997 1997 1998 1997 1997
half half full half half full
year year year year year year
----------------------------------------------------------------------
Weighted average
for operating 1.66 1.66 1.63 254.3 236.2 242.1
profits/(losses)
Period end rate 1.67 1.66 1.65 255.4 244.8 250.8
----------------------------------------------------------------------
CONTACT: Pearson Pear·son , Lester Bowles 1897-1972. Canadian politician who served as prime minister (1963-1968). He won the 1957 Nobel Peace Prize for his role in the negotiation of a solution to the Suez crisis (1956). plc John Fallon John Fallon (born Cambuslang, 1940) was a goalkeeper for Celtic F.C., who was a member of the famous Lisbon Lions of 1967. Fallon was taken on as a junior by Celtic, and soon was promoted to cover for the famous eccentric keeper Frank Haffey. , Communications Director 011 44 171 411 2310 or U.S. contact: Kekst and Company Roy Roy, city (1990 pop. 24,603), Weber co., N Utah, near Great Salt Lake; settled by Mormons 1877, inc. 1937. Computer equipment is manufactured, and many residents work at nearby Hill Air Force Base. Winnick 212-521-4842 |
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