By Lilly Vitorovich LONDON--Publisher Pearson PLC (PSO) Friday posted a fall in first-half profit, hurt by soft trading at Penguin Books and the loss of earnings following the sale of its stake in stock and bond index company FTSE International Ltd., but reiterated that it expects sales and profit growth for the year. U.K.-based Pearson, which has extensive educational publishing operations, booked a 28% drop in net profit to 43 million pounds ($67.6 million) in the first six months of 2012 from GBP60 million a year earlier, despite a 6.9% rise in sales to GBP2.58 billion, slightly ahead of market expectations of GBP2.55 billion. Heading into the second-half of the year, Pearson said it sees "good trading momentum in North America, International and the FT Group offsetting weakness in Professional Education and Penguin." Pearson is a major player in the education industry in North America, publishing school textbooks and producing educational software for teachers and pupils, but the business is coming under pressure from digital schoolbooks and online learning, while its classic and fictional book publishing business is being undercut by e-books, read by commuters on tablet computers. The company is starting to make inroads in the online learning sector, forecasting in February that digital revenue will overtake revenue from its traditional publishing operations this year. It is also looking to emerging markets, including China, Brazil and India, for growth. Pearson's education business accounts for more than 60% of its earnings and sales, but competition is heating up in the large U.S. education market, as media company News Corp. (NWS) moves to expand its business into the sector. This week, News Corp. announced a partnership with mobile operator AT&T Inc. (T) to provide tablet-based learning and assessment products for kindergarten through grade 12. The two companies will offer a fourth-generation mobile platform on tablets through a pilot program this coming school year. News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. Adjusted operating profit--which strips out currency exchange rate fluctuations, acquisitions, disposals and the depreciation of assets and is one of the key figures tracked by U.K. analysts--fell 10% to GBP188 million for the six months to June 30 from GBP208 million, in line with market expectations. The performance was also hurt by changes in U.K. apprenticeship funding, which in turn hit profits at its Professional Education unit. Pearson had warned in April that its adjusted operating profit would be down in the first half of 2012, blaming seasonal effects, as it gets the bulk of its revenue in the second half of the year. However, the company also forecast sales and adjusted operating profit growth for 2012. The GBP450 million gained from sale of its 50% stake in FTSE International to the London Stock Exchange has provided additional resources for acquisitions. The company has made a handful of bolt-on purchases, including Penguin's takeover of U.S. self-publishing company Author Solutions Inc. for $116 million. That deal marks the first major acquisition of a large-scale self-publishing company by a traditional book publisher, underscoring the changes being wrought in the industry as e-readers like Kindle and tablet computers enable authors to bypass traditional publishing houses. Pearson declared an interim dividend of 15 pence a share, up 7% from 14 pence a year earlier. Pearson shares closed steady Thursday at 1294 pence, valuing the company at GBP10.56 billion. Write to Lilly Vitorovich at lilly.vitorovich@dowjones.com; Twitter: @LillyVitorovich Order free Annual Report for Pearson Plc Visit http://djnweurope.ar.wilink.com/?ticker=GB0006776081 or call +44 (0)208 391 6028 Order free Annual Report for London Stock Exchange Group Plc Visit http://djnweurope.ar.wilink.com/?ticker=GB00B0SWJX34 or call +44 (0)208 391 6028 Order free Annual Report for AT&T, Inc. Visit http://djnweurope.ar.wilink.com/?ticker=US00206R1023 or call +44 (0)208 391 6028 Order free Annual Report for News Corp. Visit http://djnweurope.ar.wilink.com/?ticker=US65248E1047 or call +44 (0)208 391 6028 Order free Annual Report for Pearson Plc Visit http://djnweurope.ar.wilink.com/?ticker=US7050151056 or call +44 (0)208 391 6028 Subscribe to WSJ: http://online.wsj.com?mod=djnwires
