Bloomberg News

Pearson Lowers 2012 Forecast Citing Tough Market Conditions

January 21, 2013

Pearson Plc (PSON), owner of the Financial Times newspaper, cut its forecast for 2012 and predicted a difficult 2013, as tougher market conditions hit earnings at its professional education and FT Group units.

Pearson reduced its earnings per share forecast for 2012 to about 84 pence from 84.9 pence. The difficult market, along with “structural industry change,” will continue into 2013, the London-based company said in a statement today.

Pearson said 2012 earnings will reflect the sale of FTSE International and losses from its Pearson in Practice U.K. adult training business, which the company plans to sell. To combat declines in print sales, Pearson has emphasized its education businesses under new Chief Executive Officer John Fallon, and in November the company said it may re-examine its ownership of the Financial Times. Pearson said last week the FT is not for sale.

“While the downgrade may seem modest, the mere fact they have done one for a share with such a high rating and reputation for updates” is significant, said Ian Whittaker, a media analyst at Liberum Capital in London who recommends selling the shares.

The company expects to report operating profit of about 935 million pounds ($1.49 billion) for last year compared with 942 million pounds for 2011, Pearson said in the statement.

Shares Drop

The stock fell 2.9 percent to 1,202 pence as trading volume reached almost triple the three month daily average at the 4:30 p.m. close in London. The decline was the biggest intraday drop in six months.

Pearson is the second-worst performer in the Stoxx 600 Media Supersector Index over the past three months, with a decline of about 1.3 percent. The 28-company index has gained 9.3 percent in that period, led by Sky Deutschland AG (SKYD) and Mediaset SpA. (MS)

Pearson, which generates about 60 percent of sales from the U.S., said it will report good revenue growth for 2012 even as the fourth quarter slowed on weaker advertising. The company’s Financial Times Group division will report “significantly” lower full-year profit reflecting the absence of a contribution from FTSE International.

The professional education business will also post a significant drop on the Pearson in Practice operation, which in the first half of 2012 had a loss of 10 million pounds, compared with a 16 million-pound profit for 2011, the company said. Pearson plans to sell this business and is estimating the cost for closure and impairment at about 120 million pounds.

Modest Revenue

Pearson’s North American education division will report “modest” revenue growth at constant exchange rates, while international education will show double-digital sales growth on good performances in development markets, assessment and English-language teaching.

Pearson’s Penguin book division has traded in line with expectations and will report higher revenue at constant exchange rates. The company announced a combination with Bertelsmann AG’s Random House last year, and is going through regulatory clearance.

Pearson is due to report full year earnings on Feb. 25.

To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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