Publishing group Pearson continues to build digital and services revenues and expects income from this side of the business to exceed that from traditional publishing this year. The digital push is timely because profits at the group's Penguin publishing division - accounting for almost 12 per cent of group profit in 2011 - collapsed from £42m to £22m, although the relatively weak publishing schedule will be stronger in the second half and ebook revenue is growing strongly, up by a third in the period to account for almost a fifth of Penguin's sales.
Profits were also dragged lower by a weak performance on the professional training side, which was affected by a change in UK funding criteria that effectively stopped Pearson from accepting new recruits. Adjusted operating profits there slid from £26m to just £9m.
The shortfall was partly made up by Pearson's largest business, North American Education, which increased operating profits from £46m to £62m, underpinned by a 10 per cent rise in student registrations for its 'MyLab' digital learning and further growth at its eCollege learning programme. The FT Group was another strong performer, reporting digital subscriptions up 31 per cent to over 300,000 and registered users up by 29 per cent to 4.8m. However, the unit's profits will be lower for the full year, reflecting a loss of income following the sale of FTSE International, weak advertising and costs associated with the shift from print to digital.
Broker Charley Stanley notes the shares trade "on a PE ratio of 14.7 - a significant premium to the pan-European professional publisher peer group, but justified by the more defensive than average profile and superior long-term earnings growth prospects".
| PEARSON (PSON) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,234p | MARKET VALUE: | £10.1bn | |
| TOUCH: | 1,232-1,234p | 12-MONTH HIGH: | 1,302p | LOW: 1,002p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 708p* | NET DEBT: | 20% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 2.42 | 82.0 | 7.50 | 14.0 |
| 2012 | 2.58 | 59.0 | 5.40 | 15.0 |
| % change | +7 | -28 | -28 | +7 |
Ex-div: 15 Aug Payment: 14 Sep *Includes intangible assets of £6.28bn, or 769p a share | ||||
