PearsonPearson 20012001 results presentation results presentation

Monday 4 March 2002

Financial highlightsFinancial highlights

£m£m 20012001 20002000

salessales 4,2254,225 3,6893,689 + 15%+ 15%

operating profitoperating profit 426426 414414 + 3%+ 3%

pre-tax profitpre-tax profit 294294 333333 - 12%- 12%

adjusted earnings per shareadjusted earnings per share 22.5p22.5p 31.9p31.9p - 29%- 29%

dividend per sharedividend per share 22.3p22.3p 21.4p21.4p + 4%+ 4%

CONTINUING OPERATIONS BEFORE GOODWILL AND EXCEPTIONAL CONTINUING OPERATIONS BEFORE GOODWILL AND EXCEPTIONAL ITEMSITEMS

Advertising was the main reason for profit Advertising was the main reason for profit downturndownturn – Ad related profits down by £ – Ad related profits down by £116116mm

Other businesses did wellOther businesses did well

Earnings will rebound inEarnings will rebound in 2002 2002 – whether the economy does or not– whether the economy does or not

HeadlinesHeadlines

PearsonPearson financial performance financial performance

Costs cutCosts cut

Acquisitions integratedAcquisitions integrated

Balance sheet strengthenedBalance sheet strengthened

Working capital containedWorking capital contained

Actions to address economic Actions to address economic downturndownturn

SalesSales

£m£m 20012001 20002000totaltotal

growthgrowthunderlyinunderlying growthg growth

educationeducation 2,5962,596 2,0872,087 +24%+24% + 1%+ 1%

ft groupft group 750750 802802 - 6%- 6% - 7%- 7%

penguinpenguin 820820 755755 +9%+9% +3%+3%

internet enterprisesinternet enterprises 5959 4545 + 31%+ 31% + 27%+ 27%

continuing operationscontinuing operations 4,2254,225 3,6893,689 + 15%+ 15% 0%0%

Operating profitsOperating profits

£m£m 20012001 20002000totaltotal

growthgrowthunderlyinunderlying growthg growth

educationeducation 351351 320320 + 10%+ 10% - 5%- 5%

ft groupft group 132132 211211 - 37%- 37% - 31%- 31%

penguinpenguin 8080 7979 + 1%+ 1% + 6%+ 6%

internet enterprisesinternet enterprises (137)(137) (196)(196) + 30%+ 30% + 33%+ 33%

continuing operationscontinuing operations 426426 414414 + 3%+ 3% - 2%- 2%

tv/lazardtv/lazard 3737 7676 - 51%- 51%

463463 490490 - 6%- 6%

BEFORE GOODWILL AND EXCEPTIONAL ITEMSBEFORE GOODWILL AND EXCEPTIONAL ITEMS

P&LP&L

£m£m 20012001 20002000

operating profitoperating profit 463463 490490

goodwillgoodwill (443)(443) (239)(239)

integration costsintegration costs (74)(74) (40)(40)

total operating (loss) / profit total operating (loss) / profit (54)(54) 211211

non-operating itemsnon-operating items (123)(123) 254254

(loss) / profit before interest(loss) / profit before interest (177)(177) 465465

finance costsfinance costs (169)(169) (181)(181)

amounts written off investmentsamounts written off investments (92)(92) ----

(loss) / profit before tax(loss) / profit before tax (438)(438) 284284

DividendDividend

per share (p)per share (p) 20012001 20002000

adjusted earningsadjusted earnings 22.5p22.5p 31.9p31.9p

dividenddividend 22.3p22.3p 21.4p21.4p

earnings coverearnings cover 1.0x1.0x 1.5x1.5x

cash covercash cover 1.1x1.1x 0.9x0.9x

Capital baseCapital base

£m£m

pro pro formaforma

inc RTL inc RTL disposaldisposal

31 31 DecDec20012001

31 31 Dec Dec 20002000

intangible assetsintangible assets 4,2614,261 4,2614,261 4,5224,522

tangible assetstangible assets 542542 542542 524524

working capitalworking capital 894894 894894 853853

other net assets/(liabilities)other net assets/(liabilities) (75)(75) 690690 877877

net trading assetsnet trading assets 5,6225,622 6,3876,387 6,7766,776

shareholder’s fundsshareholder’s funds 3,7423,742 3,5883,588 4,0444,044

provisions / minoritiesprovisions / minorities 420420 420420 431431

net debtnet debt 1,4611,461 2,3792,379 2,3012,301

capital employedcapital employed 5,6225,622 6,3876,387 6,7766,776

Priorities forPriorities for 2002 2002

Protect marginsProtect margins

Maintain balance sheet strengthMaintain balance sheet strength

Improve cash flowImprove cash flow

PearsonPearson performance and priorities performance and priorities

Leading in good marketsLeading in good markets

Sharing assets, process and cultureSharing assets, process and culture

Driving performanceDriving performance

The leading source of The leading source of international business international business

news, analysis and datanews, analysis and data

19%

Continue to develop Interactive DataContinue to develop Interactive Data

Build the FT’s reach and brandBuild the FT’s reach and brand

Manage the cost baseManage the cost base

Make online investments payMake online investments pay

Broaden into education and booksBroaden into education and books

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Continue to develop Interactive DataContinue to develop Interactive Data

Build the FT’s reach and brand

Manage the cost base

Make online investments pay

Broaden into education and books

19 21

31

59

67

97 98 99 00 01

P R O F I T (£M)P R O F I T (£M)

Benefit from acquisitionsBenefit from acquisitions

Re-engineer processesRe-engineer processes

Move into real timeMove into real time

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

develop interactive datadevelop interactive data

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Continue to develop Interactive Data

Build the FT’s reach and brandBuild the FT’s reach and brand

Manage the cost base

Make online investments pay

Broaden into education and books

SOURCE: ABCSOURCE: ABC

342

386

440

485

501

97

98

99

00

01

F T Y E A R E N D C I R C U L A T I O N F T Y E A R E N D C I R C U L A T I O N (000’s)(000’s)

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

build the ft’s reach and brandbuild the ft’s reach and brand

SOURCE: ABC/ FT.COMSOURCE: ABC/ FT.COM

F T . C O M F T . C O M Unique monthly usersUnique monthly users

2.7 m2.7 m

0.2m0.2m

JAN 99JAN 99 JAN 00JAN 00 JAN 02JAN 02JAN 01JAN 01

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

build the ft’s reach and brandbuild the ft’s reach and brand

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Continue to develop Interactive Data

Build the FT’s reach and brand

Manage the cost baseManage the cost base

Make online investments pay

Broaden into education and books

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

manage the cost basemanage the cost base

Newspaper costs 15% lower

FT.com costs 35% lower

Not banking on recovery

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Continue to develop Interactive Data

Build the FT’s reach and brand

Manage the cost base

Make online investments payMake online investments pay

Broaden into education and books

(49)

(38)

(22)

(64)1H 00

2H 00

1H 01

2H 01

L O S S (£M)L O S S (£M)

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

make online investment paymake online investment pay

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

subscriptions subscriptions 10%10%

services services 15%15%

syndication syndication 25%25%

advertising advertising 50%50%

services services 15%15%

advertisingadvertising 85%85%

syndication syndication 26%26%

advertising advertising 60%60%

services services 14%14%

20002000 20012001

2002E2002E

make online investment paymake online investment pay

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Continue to develop Interactive Data

Build the FT’s reach and brand

Manage the cost base

Make online investments pay

Broaden into education and booksBroaden into education and books

f i n a n c i a l t i m e s m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

broaden into education and booksbroaden into education and books

Most potent brand in the business, Most potent brand in the business, best-in-class performancebest-in-class performance

19%

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Make Dorling Kindersley profitableMake Dorling Kindersley profitable

Sustain bestseller performanceSustain bestseller performance

Work capital harderWork capital harder

Deliver back-office savingsDeliver back-office savings

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Make Dorling Kindersley profitableMake Dorling Kindersley profitable

Sustain bestseller performance

Work capital harder

Deliver back-office savings

11.5

12.5

12.9

9.298

99

00

01

EXCLUDES DORLING KINDERSLEYEXCLUDES DORLING KINDERSLEY

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

P E N G U I N M A R G I N SP E N G U I N M A R G I N S

make dk profitablemake dk profitable

Sales force doubledSales force doubled

Costs per page down Costs per page down 1010%%

Time to market down Time to market down 1515%%

Stronger frontlist, fewer titlesStronger frontlist, fewer titles

Creative magic sparking Pearson EducationCreative magic sparking Pearson Education

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

make dk profitablemake dk profitable

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Make Dorling Kindersley profitable

Sustain bestseller performanceSustain bestseller performance

Work capital harder

Deliver back-office savings

100

145

180

9298

99

00

01

SOURCE: NEW YORK TIMES, BOOKTRACK (UK) SOURCE: NEW YORK TIMES, BOOKTRACK (UK)

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

N U M B E R O F B E S T S E L L I N G T I T L E SN U M B E R O F B E S T S E L L I N G T I T L E S

sustain bestseller performancesustain bestseller performance

SOURCE: BOOK PUBLISHING REPORT / SIMBASOURCE: BOOK PUBLISHING REPORT / SIMBA

H A R D C O V E R F I C T I O N 2 0 0 H A R D C O V E R F I C T I O N 2 0 0 11

titlestitles weeksweeks

1.1. random houserandom house 4848 229229

2.2. penguinpenguin 4040 202202

3.3. harper collinsharper collins 1616 6161

4.4. simon & simon & schusterschuster 1515 8686

5.5. time warnertime warner 1414 119119

P A P E R B A C K F I C T I O N 2 0 0 P A P E R B A C K F I C T I O N 2 0 0 11

titlestitles weeksweeks

1.1. penguinpenguin 4646 246246

2.2. random houserandom house 4444 182182

3.3. harper collinsharper collins 2525 7171

4.4. simon & simon & schusterschuster 2222 128128

5.5. time warnertime warner 1616 6161

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

sustain bestseller performancesustain bestseller performance

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Make Dorling Kindersley profitable

Sustain bestseller performance

Work capital harderWork capital harder

Deliver back-office savings

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Make Dorling Kindersley profitable

Sustain bestseller performance

Work capital harder

Deliver back-office savingsDeliver back-office savings

Merge with Pearson Ed in Australia and CanadaMerge with Pearson Ed in Australia and Canada

Globalise sourcing, regionalise other functionsGlobalise sourcing, regionalise other functions

Continue driving savings with SAPContinue driving savings with SAP

p e n g u i n m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

deliver back-office savingsdeliver back-office savings

First in publishing, testing, technologyFirst in publishing, testing, technologyand services in the US and around the worldand services in the US and around the world

us school23%

us college14%

Int’national14%

us prof’l11%

Restore profitability in Latin AmericaRestore profitability in Latin America

Capitalise on demand to learn EnglishCapitalise on demand to learn English

Grow in college and school publishingGrow in college and school publishing

Enlarge global testing businessEnlarge global testing business

InternationalInternationalp e a r s o n e d m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Protect margins in technology publishingProtect margins in technology publishing

Make corporate training profitableMake corporate training profitable

Expand certification contractsExpand certification contracts

Exploit surge in federal testing and trainingExploit surge in federal testing and training

US professionalUS professionalp e a r s o n e d m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Keep growing market shareKeep growing market share

Use technology to increase adoptions and sell-Use technology to increase adoptions and sell-throughthrough

Increase lead in custom publishingIncrease lead in custom publishing

US collegeUS collegep e a r s o n e d m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

US schoolUS schoolp e a r s o n e d m a r k e t o v e r v i e w m a n a g e m e n t a g e n d a

Gain share profitably in publishingGain share profitably in publishing

Build on leadership in testingBuild on leadership in testing

Target early learning revenuesTarget early learning revenues

Make leadership in online learning payMake leadership in online learning pay

Underlying revenues up 6%Underlying revenues up 6%

1717% growth in testing; software sales down % growth in testing; software sales down 22%%

Underlying operating profits up Underlying operating profits up 4747% % – helped by integration savings– helped by integration savings

1515%+ revenue growth in %+ revenue growth in 20022002

NCSNCS

20022002 and beyond and beyond

Strong earnings recovery in Strong earnings recovery in 20022002

Leading our markets Leading our markets iin profitability and new businessn profitability and new business

Benefiting from more integrated companyBenefiting from more integrated company

PearsonPearson 20012001 results presentation results presentation