Pearson! Interim results. 28 July 2003

Transcription

1 Pearson! Interim results 28 July 2003

2 On track for full year! Strong competitive performances! Continuing efficiency gains

3 Financial highlights m H H change as reported change underlying Sales 1,665 1,813-8% - 3% Operating profit % - 71% Profit/(loss) before tax (1) 26 - Adjusted earnings per share (2.3)p 0.5p - Dividend per share 9.4p 9.1p 3% Continuing operations before goodwill, non-operating operating items & integration costs

4 Pearson! Financial performance

5 Sales m H H change as reported change underlying Education 927 1,049-12% - 1% FT Group % - 5% Penguin % - 3% Total sales 1,665 1,813-8% - 3%

6 Sales analysis m 8 18 Exchange TSA Tech / ad downturn Acquisitions / disposals Other (38) (32) (104)

7 Sales m H H change as reported change underlying School % 0% Higher education % 3% Professional % - 6% FT Knowledge Pearson Education , % - - 1% News % - 9% IDC FT Group Penguin Total sales , ,813 5% 0% - 7% - 8% 3% - 5% - 3% - 3%

8 Pearson Education Professional Sales analysis 1H m TSA FX Technology publishing Alpha / other Testing Government Solutions (17) (15) (7) (38)

9 Sales m H H change as reported change underlying School % 0% Higher Education % 3% Professional % - 6% FT Knowledge Pearson Education , % - - 1% News % - 9% IDC FT Group Penguin Total sales , ,813 5% 0% - 7% - 8% 3% - 5% - 3% - 3%

10 Operating profits m H H change as reported change underlying Education (26) FT Group % 17% Penguin % - 45% Operating profit % - 71% Continuing operations before goodwill, non-operating operating items & integration costs

11 Operating profits m H H change as reported change underlying School % Higher Education (43) (32) - 34% - 54% Professional % - 81% FT Knowledge Pearson Education - (26) (9) News % - 30% IDC FT Group Penguin Total % 13% - 45% - 50% 21% 17% - 45% - 71%

12 Adjusted earnings per share m Operating profit Finance cost Profit/(loss) before tax Taxation Profit/(loss) after tax Minorities Adjusted profit/(loss) Adjusted earnings/(loss) per share Dividend per share H (39) (1) (18) (2.3)p 9.4p Continuing operations before goodwill, non-operating operating items & integration costs - (1) (17) H (50) 26 (9) 17 (13) 4 0.5p 9.1p

13 $ sensitivity Average HY rate Average FY rate (e) CENT CHANGE FOR FULL YEAR = APPROXIMATELY 1P EPS IMPACT

14 P&L m Operating profit Goodwill Integration costs Total operating loss Non operating items Finance costs Taxation Minorities Loss H (148) - (110) 11 (39) (9) (13) (160) H (182) (5) (111) 10 (87) (6) (13) (207)

15 Free cash flow 2003 half year 2002 half year VAR Operating profit (38) Working capital (370) (277) (93) Net tangible fixed assets (52) (69) 17 Depreciation (7) Other movements (10) (22) 12 Operating cash flow (338) (229) (109) Operating tax paid (1) (19) 18 Operating finance charge (36) (56) 20 Operating free cashflow (375) (304) (71) Non operating / integration (6) (85) 79 Total free cashflow (381) (389) 8

16 Average annual working capital Pearson Education and Penguin, m 32.8% 31.9% % of sales 1,121 (31) 1,090 (3) Pre-publication/ authors advances (102) Inventory Receivables/payables

17 Balance sheet m Intangible assets Tangible assets Operating working capital Other net liabilities Net trading assets Shareholders funds Provisions Minorities Deferred tax Net debt Capital employed H , ,107 (12) 5,153 3, (180) 1,897 5,153 H , ,129 (47) 5,549 3, (280) 1,957 5,549

18 Financial priorities! Earnings growth! Cash generation! ROIC! Balance sheet strength

19 Pearson! Interim results

20

21 US School! State budgets under pressure; education a priority! Flat market in 03; pressures linger in 04! Federal funds beginning to flow

22 US School Agenda Gain share in publishing Progress #1 in new adoptions Build on #1 rank in testing Make online leadership pay

23 #1 in new adoptions subject Secondary social studies Secondary literature Elementary social studies Elementary reading opportunity (est) $200m $110m $100m $80m market share (est) 23% 40% + 58% 30% + Total competed for Total all adoptions $585m $690m 35% 30%

24 School Agenda Gain share in publishing Progress #1 in new adoptions Build on #1 rank in testing $150m of new US business Make online leadership pay

25 Scoring in testing! 90% of revenues set for the year! $150m of new business including SAT! UK schools testing added! New US bids in H2 to support NCLB compliance

26 US School Agenda Gain share in publishing Progress #1 in new adoptions Build on #1 rank in testing $150m of new US business Make online leadership pay Full year costs $20m lower

27 Integrating online learning! Costs lower! Content integrated! Concert launched

28 US Higher Education! Enrolments rising! Budget pressures! but students pay

29 Higher Education Agenda Keep growing market share Progress US sales +4%, flat market Widen lead in custom publishing Use technology to increase adoptions and sell-through Custom sales up 20% + 2m+ students studying with our software in 03

30 Still beating the market % change in Higher Ed gross sales vs. prior year 14% 12% 10% Pearson Education Rest of industry +8.6% 8% 6% 4% 2% 0% H % SOURCE: MANAGEMENT PRACTICE DATA

31 Professional Technology Publishing 20% Government Solutions 55% Testing 25% 2002 revenues : 784m

32 Professional Agenda Maintain technology margins Expand certification contracts Progress Revenues down 20% in H1; margins up for full year Revenues up 6% in H1 Build government contracts New contracts ramping up

33 Pearson Education 30% of adoption $ won Testing revenues 90% set; software costs $20m lower Higher Ed still out- performing Professional growing strongly ex. TSA School market flat; Pearson out- performing Benefit from breadth US higher ed up 5-7%; 5 Pearson growing faster Tough 03 comparisons

34 Penguin! UK continues to grow! US market down in H1

35 Penguin Agenda Sustain bestseller performance Progress Strongest frontlist ever Further progress at DK Benefit from scale with Education Strong list in H2; further cost savings Australia, Canada integrated; UK back office integration 03

36 Pick-up at Penguin Penguin US major titles * First half Second half * INCLUDES HARDCOVER TITLES WITH VOLUMES OF 100,000 +; PAPERBACK TITLES OF 500,000+

37 Pick-up at Penguin

38 1.2 million in 4 weeks 1 million sold 680,000 in 2 weeks 42 languages 100 countrie s

39 Further progress at DK! Strong frontlist in H2; weak backlist market in H1! Investment in business and children s segments! Integration complete; further cost reductions in 04

40 183m OUP OUP Market The UK s leading book publisher 2002 UK sales, m Pearson Bertelsmann Bertelsmann News News Corp Corp WH WH Smith Smith Hachette Hachette Holtzbrinck Holtzbrinck Time Time Warner Warner BBC BBC Bloomsbury Bloomsbury Source: The Bookseller

41 Penguin Strongest frontlist ever; good start to H2 Further consolidation efficiencies Out-perform flat market Profits growing ahead of sales

42 Corporate advertising market Year-on on-year movement in ad revenues 50% 25% 0% -25% WSJ FT -50% 2000 Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2

43 FT advertising : long term trends Advertising 000 column cms 2,500 2,000 1,500 1, H1

44 FT Group Agenda Control costs Progress Actions fund 03 investments; more improvements in 04 Build the FT s reach and brand Successful UK revamp; Asia launch in H2 Develop Recoletos and IDC IDC growing; acquisitions on track; Spanish titles gain share

45 Control costs! 13m cost savings in 03 to partially fund international investment! 15m cost savings in 04 further savings on pagination, marketing, print, distribution, technology global advertising function reshaped UK and Europe regional teams combined

46 Build the FT s reach and brand! UK revamp improves circulation trends! FT.com audience still growing 3.5m users; 57,000 subscribers! Asian edition to launch in Autumn

47 Develop Recoletos and IDC! Spanish titles gaining share! Merrill Lynch SPS integrated; Comstock on track! 95% renewal rates

48 IDC s transformation Sales and operating profits *, $m *before depreciation and amortisation

49 FT Group Reliable growth at IDC Circulation trends improving Cost base lower FT Group profits ahead of 02 Ad market uncertain Highly geared for recovery

50 On track for full year 1. Good portion of business in hand 2. Costs and efficiencies 3. Strong products

51 Pearson! Interim results