Pearson Publishes Steady Results

LONDON -- Pearson  (LSE: PSON  ) (NYSE: PSO  ) , the publisher responsible for the Financial Times, Penguin books, and Pearson Education, increased sales by 5% to 6.1 billion pounds and operating profits up 1% to 936 million pounds in preliminary 2012 results released today. Digital services and business now contribute 50% of sales, which will help to alleviate concerns that a print publisher such as Pearson would suffer the same fate as the likes of HMV and Blockbusters, which neglected to move with the times.

The increased operating profit will be of comfort, although earnings per share decreased to 84.2 pence from 86.5 pence in 2011 and operating cash flow dropped to 788 million pounds compared to 983 million pounds the previous year. Encouraging news came in the shape of an increased dividend, up 7% to 45 pence. This continued the trend for Pearson of increasing its dividend every year since 2001. Investors were overall not particularly enamored with the results, though, with shares falling 4%, or 51 pence, in early trading.

The company signalled the changing market conditions with demand for print publishing weakening in the developed world and strong in emerging markets, while digital services gained momentum. International Education revenues were up 13% with emerging market revenues up 25%. FT Group revenues were up 4%. This was driven in large part by digital subscriptions, which now exceed print circulation for the first time. Penguin book revenues also saw digital lines taking hold, with eBooks at 17% of sales.

Commenting on the results, CEO John Fallon said: 

Pearson has a sound, successful strategy: now we are significantly accelerating its implementation. Trading conditions are tough and structural changes mean many of our traditional publishing activities are under pressure. But the underlying demand for effective education remains immensely powerful and our developing world and digital services businesses have real scale and momentum. The restructuring of the company that we are announcing today is designed to strengthen dramatically Pearson's position in digital education services and in our most important markets for the future-and to enable us to capture the once-in-a-generation opportunity that comes with being the world's leading learning company.

Pearson's restructuring program is expected to cost a net of 100 million pounds in 2013 in order to generate annual cost savings of approximately 100 million pounds from 2014. These savings are earmarked to be invested into developing further organic growth.

This could point to a bright future for Pearson, with bright growth prospects despite today's fall in the price. Indeed, it may be an opportunity to snap up some of that promising growth.

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